Disclosures on material non-adjusting events

Learning objectives

• Prepare the disclosure of a material non-adjusting event: its nature and an estimate of its financial effect, or a statement that such an estimate cannot be made.L2, L3, L4
• Assess the materiality of a non-adjusting event with regard to the decisions of primary users.L3, L4

Normative references

• IAS 10 §21If non-adjusting events after the reporting period are material, non-disclosure could reasonably be expected to influence the decisions of primary users; for each material category, the entity discloses the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made.
• IAS 10 §22Examples of non-adjusting events that would generally result in disclosure: a major business combination or the disposal of a major subsidiary; the announcement of a plan to discontinue an operation; major purchases of assets, the classification of assets as held for sale, other disposals of assets or the expropriation of major assets; the destruction of a major production plant by a fire; announcing, or commencing the implementation of, a major restructuring; major ordinary share transactions; abnormally large changes in asset prices or foreign exchange rates after the reporting period; changes in tax rates or tax laws enacted or announced after the reporting period that have a significant effect on current and deferred tax assets and liabilities; entering into significant commitments or contingent liabilities, for example by issuing significant guarantees; commencing major litigation arising solely out of events that occurred after the reporting period.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

19 questions

• What must an entity disclose for each material category of non-adjusting events?L2
• The financial effect of a material non-adjusting event cannot be estimated at the authorisation date. What must the entity do?L2
• Under IAS 10, when is a non-adjusting event material enough to require disclosure?L3
• A higher tax rate is announced after the reporting period, with a significant effect on deferred taxes. What disclosure should be provided in the accounts for the year just ended?L3
• Which items make up the disclosure required for a material non-adjusting event?L2
• Which of these events after the reporting period are among the IAS 10 examples that generally require disclosure?L3
• Fleunenne, with total assets of 40 million, identifies several events after the reporting period. Which ones probably require disclosure given their effect on users' decisions?L3
• Flastois's main plant (carrying amount {plant_carrying_amount}) is destroyed by an explosion on 8 February, with no inventory inside ({inventory_destroyed}). The insurer has confirmed proceeds of {expected_insurance} (case data). What loss should be recognised at 31 December and what financial effect estimated in the notes?L3
• A fire on 3 March destroys Flindouël's production site: buildings and machinery ({plant_carrying_amount}) and stored inventories ({inventory_destroyed}). Insurance will cover {expected_insurance} (case data). The accounts at 31 December are not yet authorised. State the loss at the reporting date and the financial effect to disclose.L3
• Flolbix has taxable temporary differences of {taxable_temporary_differences} at 31 December; its deferred tax liability is measured at the {rate_at_year_end} rate applicable at the reporting date (case data). In February, a rate of {rate_announced_after} is announced. What liability should be kept at the reporting date and what effect disclosed?L3
• On 15 February, before its 2025 accounts are authorised, Flosia issues {new_shares} new ordinary shares at a price of {issue_price}. What amount of the transaction should be given in the disclosure of events after the reporting period?L2
• Vryrvorn's note reads: 'A fire destroyed our main warehouse in February.' No further detail is given, although the event is material. What is the error?L2
• In February, Vréndore acquires a group the same size as itself. Its notes on events after the reporting period say nothing about it, 'since the transaction does not change the accounts for the year'. What is the error?L3
• Vuscia remeasures its deferred taxes at 31 December at the new rate announced by the government in January, and gives no disclosure of the change. What is the error?L3
• In February, a foreign regulator suspends the operating licence of Féstax's main subsidiary. The event is material; its financial effect cannot yet be estimated at the authorisation date. What disclosure applies?L2
• After the reporting period, Dreuscade loses a customer accounting for 1% of its revenue and signs the disposal of a division representing 30% of its assets. Which event(s) should be disclosed?L3
• In February, an accident at a Vuvois site, occurring that same month, leads local residents to bring a major claim against it; the outcome and amount are highly uncertain. How is it treated in the accounts at 31 December?L4
• Between the reporting date and authorisation, Foscot suffers a flood at a warehouse, acquires a competitor and completes a capital increase. Draft the note on non-adjusting events after the reporting period.L4
• Féstax's audit committee challenges the decision not to disclose three events after the reporting period that management considers 'minor': a dispute with a supplier, the closure of a branch and a 12% fall in a billing currency. Write an assessment note.L4