(CU 2,000,000)
Profit attributable to ordinary equity holders of the
parent entity including assumed conversions
CU 9,890,000
Weighted-average shares
6,076,667
Plus: incremental shares from assumed conversions
Warrants 14,880
(m)
Convertible preference shares
450,000
(n)
5% convertible bonds
120,000
(o)
Dilutive potential ordinary shares
584,880
Adjusted weighted-average shares
6,661,547
Diluted EPS
Profit from continuing operations
CU 1.78
Loss from discontinued operations
(CU 0.30)
Profit
CU 1.48
(l) (CU 12,000,000 × 5%) ÷ 4; less taxes at 40%
(m) [(CU 57.125* – CU 55) ÷ CU 57.125] × 600,000 = 22,320 shares; 22,320 × 8/12 = 14,880 shares
* The average market price from 1 January 20X1 to 1 September 20X1
(n) (800,000 shares × 5/12) + (200,000 shares × 7/12)
(o) 480,000 shares × 3/12
The following illustrates how Company A might present its earnings per share data in its statement of
comprehensive income. Note that the amounts per share for the loss from discontinued operations are not
required to be presented on the face of the statement of comprehensive income.
For the year ended 20X1
CU
Earnings per ordinary share
Profit from continuing operations
1.93
Loss from discontinued operations
(0.33)
Profit
1.60
Diluted earnings per ordinary share
Profit from continuing operations
1.78
Loss from discontinued operations
(0.30)
Profit
1.48
2940 Chapter 33
The following table includes the quarterly and annual earnings per share data for Company A. The purpose
of this table is to illustrate that the sum of the four quarters’ earnings per share data will not necessarily
equal the annual earnings per share data. The Standard does not require disclosure of this information.
First
Second
Third
Fourth
Full
quarter
quarter
quarter
quarter
year
CU
CU
CU
CU CU
Basic EPS
Profit (loss) from continuing operations
0.98 1.10 0.15 (0.10) 1.93
Loss from discontinued operations
– – (0.31)
– (0.33)
Profit (loss)
0.98 1.10 (0.16)
(0.10) 1.60
Diluted EPS
Profit (loss) from continuing operations
0.80 1.00 0.15 (0.10) 1.78
Loss from discontinued operations
– – (0.30)
– (0.30)
Profit (loss)
0.80 1.00 (0.15)
(0.10)
1.48
This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32.
References
1
IFRIC Update, June 2017.
2941
Chapter 34
Events after the
reporting period
1 INTRODUCTION .......................................................................................... 2943
2 REQUIREMENTS OF IAS 10 ........................................................................ 2944
2.1
Objective, scope and definitions .................................................................... 2944
2.1.1
Date when financial statements are authorised for issue .......... 2944
2.1.1.A
Re-issuing (dual dating) financial statements .......... 2947
2.1.2
Adjusting events ................................................................................. 2947
2.1.3 Non-adjusting
events
........................................................................
2948
2.2
The treatment of adjusting events ................................................................... 2951
2.2.1
Events requiring adjustment to the amounts recognised,
or disclosures, in the financial statements ..................................... 2951
2.2.2
Events indicating that the going concern basis is not
appropriate........................................................................................... 2951
2.3
The treatment of non-adjusting events ......................................................... 2952
2.3.1
Declaration to distribute non-cash assets to owners ................. 2954
2.3.2
Breach of a long-term loan covenant and its subsequent
rectification ......................................................................................... 2955
2.4
Other disclosure requirements ....................................................................... 2955
3 PRACTICAL ISSUES ..................................................................................... 2956
3.1
Valuation of inventory ...................................................................................... 2956
3.2
Percentage of completion estimates ............................................................... 2957
3.3
Insolvency of a debtor ...................................................................................... 2958
3.4
Valuation of investment property at fair value and tenant
insolvency ........................................................................................................... 2958
3.5
Discovery of fraud after the reporting period ............................................. 2958
3.6
Changes to estimates of uncertain tax treatments ...................................... 2959
2942 Chapter 34
List of examples
Example 34.1:
Financial statements required to be approved by
shareholders ....................................................................................... 2945
Example 34.2:
Financial statements required to be approved by
supervisory board .............................................................................. 2945
Example 34.3:
Financial statements required to be approved by
supervisory board – changes are made by supervisory
board .................................................................................................... 2945
Example 34.4:
Release of financial information before date of
authorisation for issue ...................................................................... 2945
2943
Chapter 34
Events after the
reporting period
1 INTRODUCTION
IAS 10 – Events after the Reporting Period – deals with accounting for, and disclosure of:
‘those events, favourable and unfavourable, that occur between the end of the reporting
pe
riod and the date when the financial statements are authorised for issue’. [IAS 10.2, 3].
This definition, therefore, includes all events occurring between those dates –
irrespective of whether they relate to conditions that existed at the end of the reporting
period. The principal issue is determining which events after the reporting period to
reflect in the financial statements as adjustments or by providing additional disclosure.
The following timeline illustrates events after the end of the reporting period that are
within the scope of IAS 10 for an entity with a 31 December year-end:
Events after the
Events after the
Reporting
end of the reporting
end of the reporting
period
period within the
period outside the
scope of IAS 10
scope of IAS 10
1/1/2019
31/12/2019
28/2/2020
17/3/2020
18/3/2020
11/5/2020
13/5/2020
Beginning of
Reporting
Draft
Financial
Financial
Financial
Financial
the reporting
date
financial
statements
information
statements
statements
period
statements
authorised
published
approved by
filed with the
prepared
for issue
shareholders
regulator
The financial statements of an entity present, among other things, its financial position at
the end of the reporting period. Therefore, it is appropriate to adjust the financial
statements for all events that offer greater clarity concerning the conditions that existed at
the end of the reporting period, that occur prior to the date the financial statements are
authorised for issue. The standard requires entities to adjust the amounts recognised in the
financial statements for ‘adjusting events’ that provide evidence of conditions that existed
at the end of the reporting period. [IAS 10.3(a), 8]. An entity does not recognise in the financial
statements those events that relate to conditions that arose after the reporting period (‘non-
adjusting events’). However, if non-adjusting events are material (that is, non-disclosure of
the event could influence the economic decisions that users make on the basis of the
financial statements),1 the standard requires certain disclosures about them. [IAS 10.3(b), 10, 21].
2944 Chapter 34
One exception to the general rule of the standard for non-adjusting events is when the going
concern basis becomes inappropriate. This is treated as an adjusting event. [IAS 10.1, 14].
The requirements of IAS 10 and some practical issues resulting from these requirements
are dealt with, respectively, at 2 and 3 below.
2
REQUIREMENTS OF IAS 10
2.1
Objective, scope and definitions
The objective of IAS 10 is to prescribe:
• when an entity should adjust its financial statements for events after the reporting
period; and
• the disclosures that an entity should give about the date when the financial statements
were authorised for issue and about events after the reporting period. [IAS 10.1].
The standard does not permit an entity to prepare its financial statements on a going
concern basis if events after the reporting period indicate that the going concern
assumption is not appropriate. [IAS 10.1]. This requirement is discussed further at 2.2.2
below. The going concern basis is discussed in Chapter 3 at 4.1.2.
IAS 10 defines events after the reporting period as ‘those events, favourable and
unfavourable, that occur between the end of the reporting period and the date when
the financial statements are authorised for issue’. [IAS 10.3]. This definition therefore
includes events that provide additional evidence about conditions that existed at the
end of the reporting period, as well as those that do not. The former are adjusting
events, the latter are non-adjusting events. [IAS 10.3]. Adjusting and non-adjusting events
are discussed further at 2.1.2 and 2.1.3 below, respectively.
2.1.1
Date when financial statements are authorised for issue
Given the definition above, the meaning of ‘the date when the financial statements are
authorised for issue’ is clearly important. The standard observes that the process for
authorising financial statements for issue varies depending upon the management structure,
statutory requirements and procedures followed in preparing and finalising the financial
statements. [IAS 10.4].
The standard identifies two particular instances of the different meaning of ‘authorised
for issue’ as follows:
(a) An entity may be required to submit its financial statements to its shareholders for
approval (as in France, for example) after the financial statements have been
issued. In such cases, the financial statements are authorised for issue on the date
of issue, not the date when shareholders approve them. [IAS 10.5]
(b) The management of an entity may be required to issue its financial statements to
a supervisory board (made up solely of non-executives) for approval. Such
financial statements are authorised for issue when management authorises them
for issue to the supervisory board. [IAS 10.6].
These two meanings are illustrated by the following two examples, which are based on
the illustrative examples contained in IAS 10. [IAS 10.5-6].
Events after the reporting period 2945
Example 34.1: Financial statements required to be approved by shareholders
The management of an entity completes draft financial statements for the year to 31 December 2019 on
28 February 2020. On 17 March 2020, the board of directors reviews the financial statements and authorises
them for issue. The entity announces its profit and certain other financial information on 18 March 2020. The
financial statements are made available to shareholders and others on 1 April 2020. The shareholders approve
the financial statements at their annual meeting on 11 May 2020 and the approved financial statements are
then filed with a regulatory body on 13 May 2020.
The financial statements are authorised for issue on 17 March 2020 (date of board authorisation for issue).
Example 34.2: Financial statements required to be approved by supervisory
board
On 17 March 2020, the management of an entity authorises for issue to its supervisory board financial
statements for the year ended 31 December 2019. The supervisory board consists solely of non-executives
and may include representatives of employees and other outside interests. The supervisory board approves
the financial statements on 25 March 2020. The financial statements are made available to shareholders and
others on 1 April 2020. The shareholders approve the financial statements at their annual meeting on
11 May 2020 and the financial statements are filed with a regulatory body on 13 May 2020.
The financial statements are authorised for issue on 17 March 2020 (date of management authorisation for
issue to the supervisory board).
An uncommon, but possible, situation that may occur is that the financial statements
are changed after they are authorised for issue to the supervisory board. The following
example illustrates such a situation.
Example 34.3: Financial statements required to be approved by supervisory
board – changes are made by supervisory board
Same facts as in Example 34.2 above, except that the supervisory board reviews the financial statements on
25 March 2020 and proposes changes to certain note disclosures. The management of the entity incorporates
the suggested changes and re-authorises those financial statements for issue to the supervisory board on
27 March 2020. The supervisory board then approves the financial statements on 30 March 2020.
The financial statements are authorised for issue on 27 March 2020 (date of management re-authorisation for
issue to the supervisory board).
A fourth example illustrates when the entity releases preliminary information, but not
complete financial statements, before the date of the authorisation for issue.
Example 34.4: Release of financial information before date of authorisation for
issue
The management of an entity completes the primary financial statements for the year to 31 December 2019
on 21 January 2020, but has not yet completed the explanatory notes. On 26 January 2020, the board of
directors (which includes management and non-executives) reviews the primary financial statements and
authorises them for public media release. The entity announces its profit and certain other financial
information on 28 January 2020. On 11 February 2020, management issues the financial statements (with
full explanatory notes) to the board of directors, which approves the financial statements for filing on
18 February 2020. The entity files the financial statements with a regulatory body on 21 February 2020.
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 585
