In our previous articles on Indian Accounting Standards, we discussed Ind AS 1 Presentation of Financial Statement, Ind AS 11 Construction Contract and so on. You can read all previously issued Indian Accounting Standards Here. And In this article, we are going to discuss Ind AS 10 Events After The Reporting Period.
Ind AS 10 Events After The Reporting Period
The objective of Ind AS 10 Events After The Reporting Period is to prescribe:
(a) when an entity should adjust its financial statements for events after the reporting period; and (b) the disclosures that an entity should give about the date when the financial statements were approved for the issue and about events after the reporting period.
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The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate.
Events after the reporting period are those events, favorable and unfavorable, that occur between the end of the reporting period and the date when the financial statements are approved by the Board of Directors in case of a company, and, by the corresponding approving authority in case of any other entity for the issue. Two types of events can be identified:
(a) those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and (b) those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period).
However, there is an exception to the above principle. In case of a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the agreement by lender before the approval of the financial statements for issue, to not demand payment as a consequence of the breach, shall be considered as an adjusting event.
An entity shall adjust the amounts recognized in its financial statements to reflect adjusting events after the reporting period.
An entity shall not adjust the amounts recognized in its financial statements to reflect non-adjusting events after the reporting period.
However, if non-adjusting events after the reporting period material and their non-disclosure could influence the economic decisions that users make on the basis of the financial statements, then it shall disclose the following for each material category of a non-adjusting event after the reporting period:
(a) the nature of the event; and (b) an estimate of its financial effect, or a statement that such an estimate cannot be made.
If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information.
<>Read All Ind AS At: Indian Accounting Standards
Appendix A of Ind AS 10 provides guidance with regard to the distribution of noncash assets as dividends to owners. The Appendix prescribes that liability to pay such a dividend should be recognized when it is appropriately authorized and is no longer at the discretion of the entity. This liability should be measured at the fair value of assets to be distributed. Any difference between the carrying amount of the assets distributed and the carrying amount of the dividend payable should be recognized in profit or loss when an entity settles the dividend payable.
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