IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

7 EVENTS AFTER THE BALANCE SHEET DATE (lAS 10) 1. BACKGROUND AND INTRODUCTION 1.1 The ba lance shee t date is the pivotal date at which the financia l posi tion of an entity is deter– mi ned and reported. Th us, eve nts that occ ur up to that date are cr itical in arriving at an entity ' s fi– nancia l results and the financia l position. However, sometimes events occ urri ng after the balance sheet date may prov ide add itional information about events that occurred before and up to the bal – ance sheet date. This information may have an impact on the financial results and the financial po– sition of the entity. It is imperati ve that those post-balance sheet events up to a certai n "cutoff date" (discussed later and referred to as the authorization date) be take n into account in prepari ng the financial statements for the year ended and as at the balance sheet. 1.2 Additionally, certain eve nts that occ ur after the balance shee t date might not affect the figures reported in the financial state ments but may warrant discl osur e in footnotes to the financial sta te– ment s. Informing users of financial statements about such post-balance shee t dat e events th rou gh foo tnote disclosures helps them make informed decisions wit h respect to the entity, keeping in mind the imp act these post-balance sheet eve nts may have on the financial position of the ent ity as at the ba lance sheet date . 2. SCOPE lAS 10, Events After the Balance Sheet Date, provides guida nce on accounting and disclosure of post-balance sheet events. For the purposes of this Standa rd, post- balance sheet events are catego– rized into "adj usting" and "nonadjusting" events. Th e issue add ressed by the Standard, lAS 10, is to what extent anything that happens during the period when the financia l statements are being pre– pare d should be reflec ted in those fina ncia l statements . Th e Standa rd distinguishes between event s that provide info rmat ion about the state of the entity at balance shee t date and those that concern the next financial peri od . A secondary issue is the cutoff poi nt beyond which the financia l state– ments are consider ed to be finalized. 3. DEFINITIONS OF KEY TERMS Events after the balance sheet date. Those post- balance sheet events, bot h favorab le and unfavorable, that occur between the balance sheet date and the date when the financial statements are authorized for issue. Adjusting events after the balance sheet date. Those post-balance sheet events that pro– vide ev ide nce of conditions that existed at the ba lance shee t dat e. Nonadjusting events after the balance she et date. Those post-balanc e sheet events that are indicative of conditions that arose after the balanc e shee t date . 4. AUTHORIZATION DATE 4.1 Th e authorization date is the date when the financial sta tements could be conside red legall y author ized for issuance. The dete rmination of the authoriza tion date is criti cal to the concept of events afte r the balance sheet date. The authorization date serves as the cut off po int after the bal– ance sheet date up to which the post- balance shee t events are to be examined in order to ascertain whet her such events qualify for the treatment prescribed by lAS 10. This Standard ex plains the concept through the use of examples. 4.2 The genera l principl es that need to be considered in determining the "authorization date" of the financia l statements are set out next.