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It is not practicable for preparers to finalise financial statements without a period of time elapsing between the balance sheet date and the date on which the financial statements are authorised for issue. The question therefore arises as to the extent to which events occurring between the balance sheet date and the date of approval (that is, 'events after the reporting period' or ‘post balance sheet events’) should be reflected in the financial statements.
Events after the reporting period are either adjusting events or non-adjusting events. Adjusting events provide additional evidence of conditions that already existed at the balance sheet date – for example, the determination, after the year end, of the consideration for assets sold before the year end; or the settlement of a court case after the balance sheet date that confirms that the entity had a present obligation at the balance sheet date. Non-adjusting events indicate conditions that arose after the balance sheet date – for example, announcing a plan to discontinue an operation after the year end or changes in tax rates or tax laws enacted or announced after the balance sheet date.
The carrying amounts of assets and liabilities at the balance sheet date are adjusted only for adjusting events or events that indicate that the going-concern basis of preparation in relation to the whole entity is not appropriate. Significant non-adjusting events, such as the issue of shares, major business combinations, destruction of a major production plant by fire, or abnormally large changes after the reporting period in asset prices or foreign exchange rates, are disclosed.
If an entity enters into any significant commitment or contingent liability after period end, it must be disclosed as a non-adjusting event. Other standards require disclosure of commitments that exist at the balance sheet date that will affect future periods, such as capital commitments and future lease cash outflows which are not already included in lease liabilities (for example. committed leases which have not yet commenced) or operating lease commitments.
Dividends proposed or declared after the balance sheet date but before the financial statements have been authorised for issue are not recognised as a liability at the balance sheet date. However, the details of these dividends are disclosed in the notes in accordance with IAS 1.
Date of authorization of the financial statements for issue
An entity discloses the date on which the financial statements were authorised for issue and who gives that authorisation. Where applicable, if the entity’s owners or other parties have the power to amend the financial statements after issue, it should be disclosed.