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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#ffffff” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.106″ title=”Index” open=”off”]Contents
32.1 Scope. 32.2 Events after the end of the reporting period defined.
32.2.1 Extract from FRS102: Section 32.2- 32.3.
32.3 Recognition and measurement – Adjusting events after the end of the reporting period.
32.3.1 Extract from FRS102: Section 32.4-32.5.
32.3.2.2 Examples of adjusting post balance sheet events.
32.3.2.2.1 Further worked examples of adjusting post balance sheet events.
32.4 Recognition and measurement – Non-adjusting events after the end of the reporting period.
32.4.1 Extract from FRS102: Section 32.6-32.7.
32.4.2.2 Example of non-adjusting post balance sheet date events.
32.5.1 Extract from FRS102: Section 32.7-32.7B.
32.6.1 Extract from FRS102: Section 32.8.
32.7.1 Extract from FRS102: Section 32.9.
32.8 Adjusting events after the end of the reporting period. 32.9 Non-adjusting events after the end of the reporting period.
32.9.1 Extract from FRS102: Section 32.10.
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32.3 Recognition and measurement – Adjusting events after the end of the reporting period
32.3.1 Extract from FRS102: Section 32.4 – 32.5
32.4 An entity shall adjust the amounts recognised in its financial statements, including related disclosures, to reflect adjusting events after the end of the reporting period.
32.5 The following are examples of adjusting events after the end of 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:
(a) The settlement after the end of the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. The entity adjusts any previously recognised provision related to this court case in accordance with Section 21 Provisions and Contingencies or recognises a new provision. The entity does not merely disclose a contingent liability. Rather, the settlement provides additional evidence to be considered in determining the provision that should be recognised at the end of the reporting period in accordance with Section 21.
(b) The receipt of information after the end of the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted. For example:
(i) the bankruptcy of a customer that occurs after the end of the reporting period usually confirms that a loss existed at the end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and
(ii) the sale of inventories after the end of the reporting period may give evidence about their selling price at the end of the reporting period for the purpose of assessing impairment at that date.
(c) The determination after the end of the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
(d) The determination after the end of the reporting period of the amount of profit- sharing or bonus payments, if the entity had a legal or constructive obligation at the end of the reporting period to make such payments as a result of events before that date (see Section 28 Employee Benefits).
(e) The discovery of fraud or errors that show that the financial statements are incorrect.
32.3.2 OmniPro comment
32.3.2.1 Overview
An adjusting post balance sheet event is an event that provides evidence of conditions that existed at the balance sheet date and therefore requires an adjustment
32.3.2.2 Examples of adjusting post balance sheet events
The following are examples which are considered adjusting post balance sheet:
- Settlement of legal cases after year end (section 32.5(a) of FRS 102);
- Information about bankruptcy of a debtor after year end (section 32.5(b)(i) of FRS 102);
- Information about inventory impairment (section 32.5(b)(ii) of FRs 102);
- Providing further information on the measurement of assets sales/purchases made pre year end (section 32.5(c) of FRS 102);
- Information about fraud or errors within that reporting periods financial statements (section 32.5(e)of FRS 102);
- As detailed below, a decision to cease trading or liquidate an entity after year end but before authorising the accounts for issue is an adjusting event and the accounts should be prepared on a break-up basis.
- The determination of a profit share or loans where a legal or constructive obligation arose after period end (section 32.5(d) of FRS 102)
Other examples of adjusting events include:
- Serious defects discovered after year end in warrantied products sold before the year end leading to replacement or refunds required to be given.
- Rebate received after year end for pre year end purchases
- Settlement with tax authorities after year end in relation to tax inspection period pre-year end.
See below some further examples proving the points above.
32.3.2.2.1 Further worked examples of adjusting post balance sheet events
Example 2: Recoverability of trade debtor balances
Company A was owed CU100,000 from customer B at year end. Following year end the customer got into financial difficulty and is trying to enter an arrangement with creditors. Based on discussions with the Customer here, it is likely these events would force Company A to provide against the receivable balance of CU100,000.
Example 3: Indicators of impairment of PPE/land etc.
Company A owns a property stated in the year end accounts at CU500,000. Prior to issuing the financial statements a valuation was performed on this property for the purposes of valuing the company. This placed a value of CU300,000. Under Section 27, this is an indicator of impairment and a provision should be made to write the asset down to CU300,000 assuming the fair value less cost to sell is higher than value in use.
Example 4: Profit on sale of plant after year end following decision to close
Company A decided to close one of its factories and has announced the closure and redundancies to all relevant parties pre-year end. In accordance with Section 21 a provision for restructuring costs has been included in the year end accounts. Subsequent to the year end the company sold its factory for a profit. Can the entity use the profit element to reduce the provision?
The answer is no as Section 21 specifically disallows profits on disposal of fixed assets to be netted against a provision. Therefore it is a non-adjusting event. Fixed assets would be dealt with by Section 27-Impairment of assets.
Example 5: Closing office and relocating
Company A has operations in a number of counties. Prior to year end it announced that one of the locations would close and that all staff will be relocated to another location. All parties have been advised pre year end and the client has included a provision for same. Is this an adjusting event/can a provision be included?
The answer is no, as Section 21 specifically dis-allows relocation provisions.
[/et_pb_text][/et_pb_column][et_pb_column type=”1_4″][et_pb_toggle _builder_version=”3.0.106″ title=”Practical Examples” open=”off”] Example 1: Application. Example 2: Recoverability of trade debtor balances. Example 3: Indicators of impairment of PPE/land etc. Example 4: Profit on sale of plant after year end following decision to close. Example 5: Closing office and relocating. Example 6: Other than Going concern disclosure. Example 7: Extract for the approval of the financial statements. [/et_pb_toggle][/et_pb_column][/et_pb_row][/et_pb_section]