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Monday, January 25, 2010

Events after the Balance Sheet Date

Non adjusting events

Non adjusting events those that are indicative of conditions that arose after the balance sheet date.

Consequently they do not result in changes in amounts in financial statements. They may, however, be of such materiality that their disclosure is required by way of notes to ensure that financial statements are not misleading.

A number of examples are given in financial reporting standards,
  • Decline in market value of investments.
  • Declaration of dividends after the balance sheet date, to be disclosed instead in the notes to the financial statements.

If non adjusting events are material, then disclosure is made in the notes to the accounts of:

  • The nature of events,
  • An estimate of its financial affect or a statement that such an estimate cannot be made.

The financial reporting standards give a number of examples of events after the balance sheet date needing disclosure.

  • A major business combination after the balance sheet date or disposing of a major subsidiary.
  • Announcing a plan to discontinue an operation.
  • Major purchases and disposals of assets, or expropriation.
  • 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 affect on current and deferred tax assets and liabilities.
  • Entering into significant commitments or contingent liabilities.
  • Commencing major litigation arising solely out of events that occurred after the balance sheet date.


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