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Recognition and Measurement

Adjusting Events after the Balance Sheet Date

8.

An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the balance sheet date.
9.

The following are examples of adjusting events after the balance sheet date that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:

 

(a)

the settlement after the balance sheet date of a court case that confirms that the entity had a present obligation at the balance sheet date. The entity adjusts any previously recognised provision related to this court case in accordance with FRS 1372004 Provisions, Contingent Liabilities and Contingent Assets or recognises a new provision. The entity does not merely disclose a contingent liability because the settlement provides additional evidence that would be considered in accordance with paragraph 17 of FRS 1372004.
(b)

the receipt of information after the balance sheet date indicating that an asset was impaired at the balance sheet date, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted. For example:

(i)

the bankruptcy of a customer that occurs after the balance sheet date usually confirms that a loss existed at the balance sheet date on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and
(ii)

the sale of inventories after the balance sheet date may give evidence about their net realisable value at the balance sheet date.
(c)

the determination after the balance sheet date of the cost of assets purchased, or the proceeds from assets sold, before at the balance sheet date.
(d)

the determination after the balance sheet date of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the balance sheet date to make such payments as a result of events before that date (see FRS 1192004 Employee Benefits).
(e)

the discovery of fraud or errors that show that the financial statements are incorrect.

 

 

 

 

 

 

Non-adjusting Events after the Balance Sheet Date

10.

An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the balance sheet date.
11.

An example of a non-adjusting event after the balance sheet date is a decline in market value of investments between the balance sheet date and the date when the financial statements are authorised for issue. The decline in market value does not normally relate to the condition of the investments at the balance sheet date, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the balance sheet date, although it may need to give additional disclosure under paragraph 21.

Dividends

12.

If an entity declares dividends to holders of equity instruments (as defined in FRS 132 Financial Instruments: Disclosure and Presentation) after the balance sheet date, the entity shall not recognise those dividends as a liability at the balance sheet date.
13.

If dividends are declared (ie the dividends are appropriately authorised and no longer at the discretion of the entity) after the balance sheet date but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the balance sheet date because they do not meet the criteria of a present obligation in FRS 1372004. Such dividends are disclosed in the notes in accordance with FRS 101 Presentation of Financial Statements.
 

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