Organisations must consider the extent to which events occurring after their balance sheet date impact their financial statements.
This period, known as the post-balance sheet period, is the time between the balance sheet date and the date on which the financial statements are authorised for issue.
For an organisation with a balance sheet date of December 31 for its financial statements that are approved and issued one month later on January 31 of the following year, this refers to events occurring between those two dates.
IAS 10, Events After The Reporting Period, is the financial reporting standard on accounting and disclosure of such events.
It provides a distinction between post-balance sheet events that require changes in the amounts included in the balance sheet ('adjusting events') and events that require disclosure ('non-adjusting events').
This distinction depends on whether the post-balance sheet event provides additional information about conditions already existing on the balance sheet date or conditions that arose after the balance sheet date.
In the current environment, organisations should pay particular attention to post-balance sheet events that could indicate impairment of assets at the balance sheet date, such as the following.
Fraud, errors and other irregularities that occurred before the balance sheet date but were only identified after the balance sheet date should also be adjusted for in the financial statements.
It could be a result of failures in internal controls that extend back several years that require adjusting not only the current year figures in the financial statements but also an adjustment for a prior period error and restatement of the previous year's financial statements.
A restructuring and discontinuance of operations by sale or closure after the balance sheet is not an adjusting event.
However, these events often provide evidence of impairment on the balance sheet for the assets, operations, or businesses concerned.
