IAS 10
The objective of IAS 10 Events after the Reporting Period is to prescribe when an entity should adjust its financial statements for events after the reporting date and outline the disclosures required in the financial statements.
An adjusting event is one that provides further evidence of conditions that existed at the reporting date. An entity should adjust the financial statement in respect of these events.In other words, an adjusting event provides additional information, thereby leading to the recognition of an item, or a different assessment of the amount properly attributable to an item at the reporting date.
Examples of adjusting events include:
- the settlement of a court case after the reporting date which establishes definitively a claim which was in existence, but of uncertain amount, at the reporting date
- the receipt of information after the reporting date indicating that an asset was impaired at the reporting date, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted.
- the ascertainment of selling prices for inventory items, after reporting date, where those prices were uncertain at reporting date, thereby affecting the determination of the carrying amount of inventory items measured at net realisable values;
- liquidation of a major debtor with a low allowance for doubtful debts at reporting date.
In the case of adjusting events, IAS 10 confirms that the financial statements need to be adjusted to reflect this new information which has become available since the reporting date. This usually means adjusting the actual figures in the financial statements by way of a journal entry.
Who cares?
I would say not many of us.
We would be adjusting them anyway, without this IAS prompt.