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AboutIAS 10 prescribes:
Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. The two types of events are:
An entity adjusts the amounts recognised in its financial statements to reflect adjusting events, but it does not adjust those amounts to reflect non-adjusting events. If non-adjusting events after the reporting period are material, IAS 10 prescribes disclosures. Standard historyIn April 2001 the International Accounting Standards Board (Board) adopted IAS 10 Events After the Balance Sheet Date, which had originally been issued by the International Accounting Standards Committee in May 1999. IAS 10 Events After the Balance Sheet Date replaced parts of IAS 10 Contingencies and Events Occurring After the Balance Sheet Date (issued in June 1978) that were not replaced by IAS 37 Provisions and Contingent Assets and Contingent Liabilities (issued in 1998). In December 2003 the Board issued a revised IAS 10 with a modified title—Events after the Balance Sheet Date. This revised IAS 10 was part of the Board’s initial agenda of technical projects. As a result of the changes in terminology made by IAS 1 Presentation of Financial Statements in 2007, the title of IAS 10 was changed to Events after the Reporting Period. Other Standards have made minor consequential amendments to IAS 10. They include IFRS 13 Fair Value Measurement (issued May 2011), IFRS 9 Financial Instruments (issued July 2014) and Definition of Material (Amendments to IAS 1 and IAS 8) (issued October 2018). The following auditing standard is not the current version and does not reflect any amendments effective on or after December 31, 2016. The current version of the auditing standards can be found here. An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but
prior to the issuance of the financial statements, that have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. These occurrences hereinafter are referred to as "subsequent events." [As amended, effective September 2002, by Statement on Auditing Standards No. 98.] [The following note is effective for audits of fiscal years ending on or after November 15, 2007. See
PCAOB Release 2007-005A. For audits of fiscal years ending before November 15, 2007, click here.] Note: When performing an integrated audit of financial statements
and internal control over financial reporting, refer to paragraphs 93-97 of PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, which provide direction with respect to subsequent events in an audit of internal control over financial
reporting. Two types of subsequent events require consideration by management and evaluation by the independent auditor. The first type consists of those events that provide additional evidence with respect to conditions that existed at the date of the balance sheet and affect the estimates inherent in the process of preparing financial statements. All information that becomes available prior to the issuance of the financial statements should be used by
management in its evaluation of the conditions on which the estimates were based. The financial statements should be adjusted for any changes in estimates resulting from the use of such evidence. .04Identifying events that require adjustment of the financial statements under the criteria stated above calls for the exercise of judgment and knowledge of the facts and circumstances. For example, a loss on an uncollectible trade account receivable as a result of a customer's deteriorating financial condition leading to bankruptcy subsequent to the balance-sheet date would be indicative of conditions existing at the balance-sheet date, thereby calling for adjustment of the financial statements before their issuance. On the other hand, a similar loss resulting from a customer's major casualty such as a fire or flood subsequent to the balance-sheet date would not be indicative of conditions existing at the balance-sheet date and adjustment of the financial statements would not be appropriate. The settlement of litigation for an amount different from the liability recorded in the accounts would require adjustment of the financial statements if the events, such as personal injury or patent infringement, that gave rise to the litigation had taken place prior to the balance-sheet date. .05The second type consists of those events that provide evidence with respect to conditions that did not exist at the date of the balance sheet being reported on but arose subsequent to that date. These events should not result in adjustment of the financial statements. fn1 Some of these events, however, may be of such a nature that disclosure of them is required to keep the financial statements from being misleading. Occasionally such an event may be so significant that disclosure can best be made by supplementing the historical financial statements with pro forma financial data giving effect to the event as if it had occurred on the date of the balance sheet. It may be desirable to present pro forma statements, usually a balance sheet only, in columnar form on the face of the historical statements. .06Examples of events of the second type that require disclosure to the financial statements (but should not result in adjustment) are:
.07Subsequent events affecting the realization of assets such as receivables and inventories or the settlement of estimated liabilities ordinarily will require adjustment of the financial statements (see paragraph .03) because such events typically represent the culmination of conditions that existed over a relatively long period of time. Subsequent events such as changes in the quoted market prices of securities ordinarily should not result in adjustment of the financial statements (see paragraph .05) because such changes typically reflect a concurrent evaluation of new conditions. .08When financial statements are reissued, for example, in reports filed with the Securities and Exchange Commission or other regulatory agencies, events that require disclosure in the reissued financial statements to keep them from being misleading may have occurred subsequent to the original issuance of the financial statements. Events occurring between the time of original issuance and reissuance of financial statements should not result in adjustment of the financial statements fn2 unless the adjustment meets the criteria for the correction of an error or the criteria for prior period adjustments set forth in Opinions of the Accounting Principles Board. fn* Similarly, financial statements reissued in comparative form with financial statements of subsequent periods should not be adjusted for events occurring subsequent to the original issuance unless the adjustment meets the criteria stated above. .09Occasionally, a subsequent event of the second type has such a material impact on the entity that the auditor may wish to include in his report an explanatory paragraph directing the reader's attention to the event and its effects. (See section 508.19.) Auditing Procedures in the Subsequent Period.10There is a period after the balance-sheet date with which the auditor must be concerned in completing various phases of his audit. This period is known as the "subsequent period" and is considered to extend to the date of the auditor's report. Its duration will depend upon the practical requirements of each audit and may vary from a relatively short period to one of several months. Also, all auditing procedures are not carried out at the same time and some phases of an audit will be performed during the subsequent period, whereas other phases will be substantially completed on or before the balance-sheet date. As an audit approaches completion, the auditor will be concentrating on the unresolved auditing and reporting matters and he is not expected to be conducting a continuing review of those matters to which he has previously applied auditing procedures and reached satisfaction. .11Certain specific procedures are applied to transactions occurring after the balance-sheet date such as (a) the examination of data to assure that proper cutoffs have been made and (b) the examination of data which provide information to aid the auditor in his evaluation of the assets and liabilities as of the balance-sheet date. .12[The following paragraph is effective for audits of fiscal years ending on or after November 15, 2007. See PCAOB Release 2007-005A. For audits of fiscal years ending before November 15, 2007, click here.] In addition, the independent auditor should perform other auditing procedures with respect to the period after the balance-sheet date for the purpose of ascertaining the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial statements in conformity with generally accepted accounting principles. These procedures should be performed at or near the date of the auditor's report. The auditor generally should:
Which of the following events after the reporting period would require adjustment of the accounts before issuance of the financial statements?Which of the following events after the reporting period would require adjustment in an entity's financial statements? Bankruptcy of a customer, which occurs after the end of the reporting period and before the issuance of the statements, resulting in the loss of a trade receivable account.
Which of the following post balance sheet events would generally require disclosure in the notes but no adjustment of the financial statements?Which of the following post-balance-sheetevents would generally require disclosure, but no adjustment of the financialstatements? b. Settlement oflitigation when the event that gave rise to the litigation occurred prior tothe balance sheet date.
What is adjustment of post balance sheet events?If events take place before the balance sheet date that trigger a lawsuit, and lawsuit settlement is a post balance sheet event, consider adjusting the amount of any contingent loss already recognized to match the amount of the actual settlement.
Which of the following subsequent events events after the reporting date would require adjustment of the accounts before issuance of the financial statements?Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued? Settlement of litigation, in excess of the previously recorded liability.
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