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(86)-EVENTS AFTER THE BALANCE SHEET DATE

Sunday, January 24, 2010

Events after the Balance Sheet Date

Events after the balance sheet date are those events, favorable and unfavorable, that occur between the balance sheet date and the date when the financial statements are authorized for issue.

The financial statements are significant of a company’s success or failure. It is important, therefore, that they include all the information necessary for an understanding of the company’s position.

Adjusting events

Adjusting events are events after the balance sheet date “that provide evidence of conditions that existed at the balance sheet date.

Financial reporting standards cite a number of events after the balance sheet date which normally should be classified as adjusting events. They include:
  • The settlement after the balance sheet date of a court case that the entity had a present obligation at the balance sheet date. The adjustment may be to a provision under financial reporting standards or to set up a new provision because it is no longer a contingent liability
  • The receipt of information indicating that an asset was impaired at the balance sheet date, or that the amount of impairment needs to be adjusted
  • The determination after the balance sheet date of the cost of assets purchased or the proceeds from assets sold before the balance sheet date
  • The determination of the amount of any profit sharing or bonus payments if there was a present legal or constructive obligation at the balance sheet to make such payments due to events before that date
  • The discovery of fraud or errors that show the financial statements are incorrect

1 comments:

Shadhin Kangal said...

When an event brings change to account balances, it is classified as transaction and recorded in the books. It is the biggest difference between transaction and event in accounting.

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