Events after the reporting period are favorable and uunfavorable unfavorable between the end of the reporting period and when the financial statements are authorized for issue. IAS 10 distinguishes between adjusting and non-adjusting events after the reporting period. The principal issues are determining which events after the reporting period are to be reflected in the financial statements as adjusting events and, for non-adjusting events, what additional disclosures to provide. Many governments have introduced various measures to combat the pandemic, including travel restrictions, quarantines, closure of business and other venues, and lockdown of a particular area. These measures have affected the global supply chain and the demand for goods and services. At the same time, fiscal and monetary policies are being relaxed to sustain the economy. These government responses and their corresponding effects are still evolving.

For entities that are affected or expect to be impacted by measures taken, the critical judgment and evaluation that management needs to make are whether and, if so, what event in this series of events provides evidence of the condition that existed at the end of the reporting period for the entity’s activities or their assets and liabilities. When making this judgment, the entity considers all available information about the pandemic’s nature, timeline, and measures taken. For recognition, for instance, in the context of a government grant, the entity needs to make a judgment on whether developments around laws and regulations provide a basis for an entitlement to the grant, as of the balance sheet date, to be considered for recognition in the current reporting period. If a new law or regulation introduces a government grant after the end of the reporting period, it will represent a non-adjusting subsequent event. When determining whether it is reasonably assured that the entity will comply with the conditions attached to the grant and that the grant will be received as per paragraph 7 of IAS 20, information obtained after the reporting period (e.g., confirmation of the entity receiving the grant), may provide evidence of an adjusting event.

Determining whether events should result in adjustments to the financial statements depends on the nature of the subsequent event and the accounting topic. This assessment will, in many cases, be highly judgemental, and entities should therefore consider whether disclosures about this judgment are required under the relevant circumstances. Suppose management concludes an event is a non-adjusting event; its impact is material. In that case, the entity must disclose the event’s nature and an estimate of its financial effect. For example, it may have to describe qualitatively and quantitively how the market volatility after year-end has affected its equity investments. Governmental measures imposed on sporting and social activities and border controls have affected or may affect its operations, etc. The entity must disclose that fact if an estimate cannot be made.

Sources:

  • Google Image. (2022).
  • Deloitte. (2022). IAS 10 — Events After the Reporting Period. https://www.iasplus.com/en/standards/ias/ias10
  • Ernest & Young. (2021). Applying IFRS IFRS accounting considerations of the Coronavirus pandemic.