Financial Statements: Bringing Historical Reporting Up To Date

Financial Statements: Bringing Historical Reporting Up To Date

By |2019-10-14T15:50:11+00:00October 14th, 2019|Blog, Latest News, News|

Subsequent event reporting; what is it and why is it an important consideration in the preparation of your company’s financial statements?

It is the responsibility of the Directors to consider if any significant events occurred after the balance sheet date and before the date of signing the financial statements.

Where a significant event has occurred, the Directors must then consider if this event is required to be disclosed in the notes to the financial statements.

FRS102 Section 32 deals with the requirement to disclose subsequent events, including the basis for recognition and measurement.

Where international financial reporting framework is applied by the company, IAS 10 events after the reporting date will apply. The principles, recognition and disclosure form of which form is the basis for the local reporting standard.

When considering possible disclosure, a subsequent event can fall into one of two categories; adjusting events and non-adjusting events.

Adjusting Event

Where there is evidence that the conditions existed at the end of the reporting period; this is considered an adjusting event.

In this instance, the financial statements are adjusted to reflect those events. No additional disclosure of the event is required in the subsequent event note.

Non-adjusting Event

Where the event occurred after the balance sheet date and the information came to the attached of management after the balance sheet date, an accounting adjustment is not required to be reflected in the financial statements.

The nature and impact of such event is required to be included in the financial statements by way of a note disclosure.

Disclosure

Where a disclosure is required, it should be sufficiently detailed in order to describe the event that has occurred, when it occurred and when management became aware of it.

The disclosure should also state the financial impact of the event, where it is possible to measure.

Relevant Events

Events that occur and the knowledge of which may affect the decision making of the users of the financial statements should be considered to be significant events. The materiality of the event should also be considered.

Benefits

The inclusion of detailed subsequent event notes in the financial statements adds value to the users of those financial statements on matters that occur right up to the date of signing the financial statements.

You can learn more about Linda Doran, Director, Audit & Advisory, by visiting her on LinkedIn.

Also Read: 5 Key Benefits of Outsourcing Your Finance Function

About the Author:

Linda Doran