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IND AS 10, titled “Events After the Reporting Period“, provides guidance on handling such events to ensure accurate and reliable financial statements. In the ever-evolving landscape of financial reporting, it is essential for entities to consider events that occur after the reporting period but before the financial statements are approved for issuance. In this article, we will explore the key concepts and considerations outlined in IND AS 10, shedding light on the significance of addressing events after the reporting period.
Scope and objective:-
IND AS 10 sets out principles and guidelines for entities to assess and report events that occur after the reporting period but before the financial statements are authorized for issuance. The standard applies to all entities that prepare financial statements in accordance with Indian Accounting Standards (IND AS).
Events After the Reporting Period:-
IND AS 10 sets out principles for identifying and evaluating events after the reporting period. These events can be either adjusting events, which provide additional evidence about conditions existing at the end of the reporting period, or non-adjusting events, which provide information about conditions arising after the reporting period.
When evaluating events after the reporting period, entities must consider their significance and the impact they may have on the financial statements. This involves assessing the materiality of the events and their potential influence on the entity’s financial position and performance. the following steps need to consider while assessing events after the reporting period–
Determining the Reporting Period:-
IND AS 10 defines the reporting period and establishes the timeline for reporting events. It helps entities identify the cutoff date for assessing events after the reporting period.
Identifying Adjusting Events:-
Adjusting events are those that provide further evidence of conditions that existed at the end of the reporting period. These events may require adjustments to the financial statements to reflect any changes in estimates or to recognize additional assets or liabilities.
Examples of adjusting events include the settlement of litigation that confirms the existence and amount of a liability at the end of the reporting period, the receipt of information that indicates an impairment loss was present at the reporting date, or the determination of the outcome of a tax dispute.
Assessing Non-Adjusting Events:-
Non-adjusting events, on the other hand, are those that provide information about conditions arising after the reporting period. These events do not require adjustments to the financial statements but may require disclosure in the financial statements to provide relevant and reliable information to users.
Examples of non-adjusting events- Company announces a significant acquisition or disposal of assets after the reporting period, declares dividends after the reporting period, or a natural disaster happening after the reporting period.
Materiality:-
The standard emphasizes the importance of materiality in evaluating these transactions and events. It highlights the need for entities to consider the impact of events on the financial statements and disclose relevant information to ensure transparency and reliability.
Timeliness of Financial Statements:-
IND AS 10 emphasizes the importance of preparing financial statements in a timely manner to incorporate relevant information up until the date of approval for issuance. It ensures that financial statements reflect the most current and accurate information available.
Disclosure:-
For adjusting events, entities are required to adjust the financial statements accordingly and provide appropriate disclosures to explain the nature and impact of the events. Non-adjusting events, while not requiring adjustments to the financial statements, should be disclosed if they are deemed significant and relevant to understanding the financial statements.
Timeliness is crucial in dealing with these adjustments and disclosures. Entities should ensure that their financial statements are prepared in a timely manner, allowing for the incorporation of relevant information up until the date of approval for issuance.
Conclusion:-
IND AS 10 provides a framework for addressing events after the reporting period, ensuring the accuracy and reliability of financial statements. By distinguishing between adjusting and non-adjusting events, entities can appropriately reflect the impact of events that occurred after the reporting period.
Adhering to the principles outlined in IND AS 10 enables entities to provide users of financial statements with relevant and timely information, enhancing transparency and aiding in decision-making. By evaluating these events and making necessary adjustments or disclosures, entities demonstrate their commitment to providing accurate and reliable financial information.