IAS 10 : Definitions

2. Definitions

The following terms are used in this Workbook:

Events after the balance sheet date

Events after the balance sheet date may be favourable or unfavourable.

Two types of events can be identified:

1. Adjusting events

Adjusting events are those events that arise after the balance sheet date, but before approval, that require the balance sheet to be amended.

2. Non-adjusting events

Non-adjusting events are conditions that arose after the balance sheet date.

Approval

The date of approval is the end of the post balance sheet period.

This date may vary depending on factors such as statutory requirements and the procedures followed in preparing, and finalising, the financial statements.

Generally when the financial statements are approved by the main board this date is the end of the post balance sheet period, regardless of subsequent approvals.

EXAMPLE final approval - 1

A bank is required to issue its financial statements to its shareholders for final approval.

In such cases, the financial statements are approved on the date of issue, not the date when shareholders approve the financial statements.

 

EXAMPLE date of approval - 1 On 31 January 2XX7, management of a bank completes draft financial statements for the year to 31 December 2XX6. On 10 February 2XX7, the board of directors reviews the financial statements and approves them for issue. On 16 February 2XX7, the bank announces its profit and selected other financial information.  On 19 March 2XX7, the financial statements are made available to shareholders, and others. On 24 April 2XX7, the shareholders approve the financial statements at the annual meeting. On 28 April 2XX7, the approved financial statements are then filed with a regulatory body The period for post balance sheet events ends on 10 February 2XX7 (date of board approval for issue).

EXAMPLE final approval -2

The financial statements are approved when the main board approves them for issue to the supervisory board, not when the supervisory board gives subsequent approval.

Supervisory boards usually comprise representatives of shareholders, workers and other stakeholders in a company. Their role is non-executive. The management board is accountable to the supervisory board.

Germany is an example of a country where larger firms have supervisory boards.

EXAMPLE date of approval - 2 On 12 February 2XX8, the management of  bank approves financial statements for issue to its supervisory board. The supervisory board is made up solely of non-executives, and may include representatives of employees, and other outside interests. On 23 February 2XX8, the supervisory board approves the financial statements. On 14 March 2XX8, the financial statements are made available to shareholders and others. On 19 April 2XX8, the shareholders approve the financial statements at their annual meeting. On 29 April 2XX8, the financial statements are filed with a regulatory body. The financial statements are approved for issue on 12 February 2XX8 which is the end of the post balance sheet period.

Events after the balance sheet date include all events up to the date when

the financial statements are approved for issue, even if those events occur after the public announcement of profit or of other selected financial information.

EXAMPLE - acquisition

Your bank makes preliminary announcements to the local Stock Exchange every quarter, based on interim financial statements prepared by management. These summarise the key figures in an abbreviated set of financial statements.

Before the IFRS financial statements (that will be sent to shareholders) are approved by the board, your bank undertakes a major acquisition (or another material event, covered by IAS 10, occurs). This event must be included in the notes to your IFRS financial statements.