IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

• When an entity is required to submit its financial statements to its shareholders for approval after they have already been issued, the authorization date in this case would mean the date of original issuance and not the date when these are approved by the shareholders; and • When an entity is required to issue its financial statements to a supervisory board made up wholly of nonexecuti ves, "authorization date" would mean the date on which management authorizes them for issue to the supervisory board.

Case Study 1

Facts The preparation of the financial statements of Excellent Corp. for the accounting period ended December 31, 2005, was completed by the management on March 15, 2006. The draft financial statements were considered at the meeting of the board of directors held on March 20, 2006, on which date the board approved them and authorized them for issuance. The annual general meeting (AGM) was held on April 10, 2006, after allowing for printing and the requisite notice period mandated by the corporate statute. At the AGM the shareholders approved the financial statements. The approved financial statements were filed by the corporation with the Company Law Board (the statutory body of the country that regulates corporations) on April 20, 2006. Required Given these facts, what is the "authorization date" in terms of lAS 10? Solution The date of authorization of the financial statements of Excellent Corp. for the year ended December 3 1, 2005, is March 20, 2006, the date when the board approved them and authorized them for issue (and not the date they were approved in the AGM by the shareholders). Thu s, all post-balance sheet events be– tween December 31, 2005, and March 20, 2006, need to be considered by Excellent Corp. for the purposes of evaluating whether they are to be accounted or reported under lAS 10. Suppose in the above-cited case, the management of Excellent Corp. was required to issue the financial statements to a supervisory board (consisting solely of nonexecutives including representatives of a trade union). The management of Excellent Corp. had issued the draft financial statements to the supervisory board on March 16, 2006. The supervisory board approved them on March 17, 2006, and the shareholders approved them in the AGM held on April 10, 2006. The approved financial statements were filed with the Company Law Board on April 20, 2006. Required Would the new facts have any effect on the date of authorization? Solution In this case, the date of authorization of financial statements would be March 16, 2006, the date the draft financial statements were issued to the supervisory board. Thus, all post-balance sheet events between December 31, 2005, and March 16, 2006, need to be considered by Excellent Corp. for the purposes of evaluating whether they are to be accounted or reported under lAS 10. 5. ADJUSTING AND NONADJUSTING EVENTS (after the balance sheet date) 5.1 Two kinds of events after the balance sheet date are distingu ished by the Standard. These are, respectively, "adjusting events after the balance sheet date" and "nonadjusting events after the bal– ance sheet date." Adjusting events are those post-balance sheet events that provide evidence of conditions that actually existed at the balance sheet date, albeit they were not known at the time. Financial statements should be adjusted to reflect adjusting events after the balance sheet date. 5.2 Typical examples of adjustin g eve nts are • The bankruptc y of a customer after the balance sheet date usually suggests a loss of trade re– ceivable at the balance sheet date. • The sale of inventory at a price substantially lower than its cost after the balance sheet date confirms its net realizable value at the balance sheet date. Case Study 2