2 Adjusting events
An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period.
The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:
- court order confirmed the present obligation at the end of reporting period and might require recognition or adjustment of provision
- The asset needs to be impaired or impairment recognized needs to be revised on receipt of latest information. For example:
- Bankruptcy confirmed the loss of receivables
- Lower Net realisable value as a result of lower selling price of inventory sold
- Any adjustment necessary in the cost of the asset bought before reporting date but cost determined after reporting date. Similarly, adjust needed in the sales proceeds from the asset sold before reporting date but sale finalized after the reporting date
- Determination of profit sharing or bonus payments after reporting period because of present or constructive obligation that arise due to the events took place before the end of reporting period
- the discovery of fraud or errors that show that the financial statements are incorrect.
3 Non-adjusting events
An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.
The following are examples of non-adjusting events after the reporting period that would generally result in disclosure (i.e. no adjustments but only disclosures if material):
- a major business combination or disposing of a major subsidiary
- announcing a plan to discontinue an operation;
- major purchases of assets, classification of assets as held for sale other disposals of assets, or expropriation of major assets by government;
- the destruction of a major production plant by a fire;
- announcing, or commencing the implementation of, a major restructuring
- major ordinary share transactions and potential ordinary share transactions
- abnormally large changes in asset prices or foreign exchange rates;
- changes in tax rates or tax laws enacted or announced that have a significant effect on current and deferred tax assets and liabilities
- entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees;
- commencing major litigation arising solely out of events that occurred after the reporting period.