Treating subsequent events in accordance with the requirements of IAS 10

INTERNATIONAL ACCOUNTING STANDARD 10
Events after the closing date
GOAL

1 The purpose of this standard is to prescribe:

(a) when an entity should adjust its financial statements for events after the balance sheet date; and

b) the information that an entity must provide regarding the date of the authorization to publish statements
financial statements and events after the balance sheet date.

The standard also requires an entity not to prepare its financial statements on a going concern basis.
operating if events subsequent to the balance sheet date indicate that the going concern
operation is not appropriate.

SCOPE

2 This standard applies to the recognition of events after the balance sheet date and to
related information to be provided.
DEFINITIONS

3 The following terms are used in this standard with the meanings specified:

Events subsequent to the balance sheet date are events, favorable and unfavorable, which occur between the
closing date and the date of authorization for publication of the financial statements. We can distinguish two types
events:

a) those which help to confirm situations that existed on the closing date (events after the closing date
closing giving rise to adjustments); and

b) those which indicate situations that arose after the closing date (events after the closing date
closing period not giving rise to adjustments).

4 The process for authorizing the publication of financial statements will vary depending on the management structure,
regulatory requirements and procedures followed for the preparation and finalization of financial statements.

5 In some cases, an entity is required to submit its financial statements for the approval of its shareholders after
that the financial statements have already been published. In such cases, the date of authorization for publication of the statements
financial statements is the date of their publication and not the date of their approval by shareholders.
Example
On February 28, 20X2, management of an entity completes draft financial statements for the year ending
December 31, 20X1. On March 18, 20X2, the Board of Directors reviews the financial statements and authorizes
their publication. The entity announces its results and other financial information on March 19, 20X2.

The financial statements are made available to shareholders and third parties on April 1, 20X2. The assembly
Annual General Meeting of Shareholders approves the financial statements on May 15, 20X2, and the financial statements
approved are filed with a regulatory authority on May 17, 20X2.

The date of authorization for publication of the financial statements is March 18, 20X2 (date of approval by the
administration).

6 In some cases, an entity's management is required to submit its financial statements for board approval.
supervisory (composed only of members who do not have decision-making functions). In such cases,
authorization to publish financial statements occurs when management authorizes their communication to the
Supervisory Board.

Example

On March 18, 20X2, the management of an entity authorizes the disclosure of financial statements to its board of
surveillance. This council, composed only of members who do not have decision-making functions, can
include staff representatives and other outside interests. The supervisory board approves the

financial statements March 26, 20X2. The financial statements are made available to shareholders and third parties on
April 1, 20X2. The annual general meeting of shareholders approves the financial statements on May 15, 20X2,
and the financial statements are filed with a regulatory authority on May 17, 20X2.

The date of the authorization to publish the financial statements is March 18, 20X2 (date on which management authorizes
their communication to the supervisory board).

7 Events after the balance sheet date include all events occurring up to the closing date
authorization for the publication of the financial statements, even if these events occur after the public announcement of the
earnings or other selected financial information.

ACCOUNTING AND EVALUATION

Events after the balance sheet date giving rise to adjustments

8 An entity shall adjust amounts recognized in its financial statements to reflect subsequent events
at the closing date giving rise to adjustments.

9 The following are examples of events after the balance sheet date requiring the entity to adjust the
amounts recognized in its financial statements or to recognize items that previously were not:

a) the settlement, after the balance sheet date, of a legal action that confirms that the entity had an obligation
current at the balance sheet date. The entity adjusts any previously recognized provision related to this action by
justice according to IAS 37 Provisions, contingent liabilities and contingent assets or recognizes a new provision. The entity

does not simply indicate in its notes a contingent liability, because the settlement of the matter provides
additional information that must be addressed in accordance with paragraph 16 of IAS 37;

(b) the receipt, after the balance sheet date, of information indicating that an asset had depreciated at the balance sheet date or
that the amount of an impairment loss previously recognized in respect of this asset must be adjusted. By
example:

i) Bankruptcy of a customer occurring after the balance sheet date generally confirms that a loss on a
receivable existed at the balance sheet date and the entity needs to adjust the carrying amount of the receivable; and

ii) the sale of stocks after the balance sheet date may give indications of their net realizable value
at the closing date;

c) the determination, after the balance sheet date, of the cost of assets purchased or of the income from assets sold before the
Closing Date;

d) the determination, after the closing date, of the amount of the payments to be made in respect of the incentive or
premiums if, at the balance sheet date, the entity had a present legal or constructive obligation to make these
payments due to events prior to that date (see IAS 19 Employee benefits); and

e) the discovery of fraud or errors showing that the financial statements are incorrect.
Events subsequent to the balance sheet date not giving rise to adjustments

10 An entity shall not adjust amounts recognized in its financial statements to reflect events
after the closing date not giving rise to adjustments.

11 An example of a post-balance sheet event that does not give rise to an adjustment is a decrease in the
market value of investments between the closing date and the date of authorization for publication of the financial statements.

The decline in market value is not normally linked to the condition of the investments at the balance sheet date, but
reflects events that occurred subsequently. Accordingly, the entity should not adjust the amounts
recognized in its financial statements as investments. Likewise, the entity does not update the amounts
indicated for investments at the balance sheet date although it may have to provide information
additional according to paragraph 21.

Dividends

12 If an entity decides to allocate dividends to holders of equity instruments (as defined in
IAS 32 Financial Instruments: Presentation) after the balance sheet date, the entity shall not recognize such dividends as
as liabilities at the balance sheet date

13 If dividends are voted (i.e. dividends have been properly authorized and are therefore no longer available)
discretion of the entity) after the balance sheet date, but before authorization for publication of the financial statements,
dividends are not recognized as debt at the balance sheet date because they do not meet the criterion
present obligation defined by IAS 37. These dividends are mentioned in the notes according to IAS 1 Presentation of
financial state.

CONTINUITY OF EXPLOITATION

14 An entity should not prepare its financial statements on a going concern basis if management determines,
after the balance sheet date, whether it intends, or has no realistic alternative but to liquidate the entity or
cease its activity.

15 A deterioration in operating income and financial position after the balance sheet date may indicate the
need to consider whether the going concern assumption is still appropriate. If this hypothesis of
going concern is no longer appropriate, its consequences are so extensive that this standard imposes a
fundamental change in accounting policy rather than an adjustment of the amounts recognized according to the
original accounting policy.

16 IAS 1 specifies the information to be provided if:

a) the financial statements are not prepared on a going concern basis; or if

b) management is aware of significant uncertainties relating to events or circumstances that may
cast significant doubt on the entity's ability to continue operating. Events or
circumstances requiring the provision of information may arise after the balance sheet date.
INFORMATION TO BE PROVIDED
Date of publication authorization

17 An entity shall indicate the date of the authorization for publication of the financial statements and indicate who gave this
authorization. Whether the owners of the entity or others have the power to amend the financial statements after their
publication, the entity must indicate.

18 For users of financial statements, it is important to know the date of authorization for publication of the
financial, because the financial statements do not reflect events subsequent to that date.
Update of the information to be provided on situations at the closing date

19 If an entity receives, after the balance sheet date, information about situations that existed on the balance sheet date, it
must update the information provided relating to these situations in light of this new information.


20 In some cases, an entity must update the information provided in its financial statements to reflect
information received after the balance sheet date, even when this information has no effect on the amounts that
the entity has recognized in its financial statements. An example of the need to update the information provided
is the case where audit evidence becomes available after the balance sheet date but relates to a contingent liability that
existed on the closing date. In addition to the fact that it must consider whether it should recognize or modify a provision
according to IAS 37, the entity must update the information provided on the contingent liability in light of this audit evidence.
Events subsequent to the balance sheet date not giving rise to adjustments

21 If events subsequent to the balance sheet date that do not give rise to adjustments are significant, the fact of
not indicating them could have an impact on the economic decisions made by the users on the basis
financial statements. Therefore, the entity will provide the following information for each significant category
events subsequent to the balance sheet date not giving rise to adjustments:

a) the nature of the event; and

b) an estimate of its financial effect, or an indication that this estimate cannot be made.

22 For example, are events after the balance sheet date that do not give rise to an adjustment, which
will generally result in information to be provided:

a) a significant business combination after the balance sheet date (IFRS 3 Business combinations
requires in this case to provide specific information) or the exit of a major subsidiary;

b) announcement of a plan to abandon an activity;


c) significant acquisitions of assets, the classification of assets as held for sale under IFRS 5
Non-current assets held for sale and discontinued operations, other disposals of assets or expropriation by
the public authorities of significant assets;

d) destruction of an important production unit by fire after the closing date;

e) the announcement, or the start of the implementation, of a significant restructuring (see IAS 37);

f) material transactions after the balance sheet date relating to ordinary shares or shares
ordinary potential (IAS 33 Earnings per share requires entities to describe these transactions, unless they
relate to issues by capitalization of profits or issue of free shares, divisions
shares or reverse stock splits, all of which must be subject to adjustment according to
IAS 33);

g) abnormally large changes in asset prices or exchange rates subsequent to the
Closing Date;

h) changes in tax rates or tax laws passed or announced after the balance sheet date, which have a
significant impact on current and deferred tax assets and liabilities (see IAS 12 Income taxes);

i) making significant commitments or being subject to contingent liabilities, for example by
the issuance of significant guarantees; and

j) the start of a material dispute resulting only from events occurring after the closing date.
EFFECTIVE DATE

23 An entity shall apply this standard for annual periods beginning on or after January 1, 2005. A
Early application is encouraged. If an entity applies this standard for a period beginning before
January 1, 2005, it must indicate.
WITHDRAWAL OF IAS 10 (REVISED 1999)

24 This standard cancels and replaces IAS 10 Events after the balance sheet date (revised 1999).