Events that occur after the Accounting Period end date

Posted 09/09/2019

Events can happen in the time between the reporting period date on the annual accounts to the business owner’s approval of the accounts to be issued; it is to be expected in some cases. Where an event does occur, an adjustment can be made to the accounts or a disclosure can be included with the figures to reflect the event. How the accounts are adjusted depends on the situation of the event itself, as per the International Accounting Standards 10 (IAS 10). The IAS collective are part of the International Financial Reporting Standards (IFRS) which have been adopted 166 jurisdictions and are followed by accountancy practices within those jurisdictions.

It may be appropriate to adjust the accounts or include a disclosure in the annual accounts even though the event happens after the date on the accounts, to show accurate information and to inform. For investors looking at the accounts a disclosure informs of an event that they would be aware of and can take into account when judging their interest in the business, or to update them on the status of their current investments.Where an event provides evidence for a condition in the accounts for the accounting period that existed has altered. For example if inventory was valued at the end of the accounting period but was sold for less than anticipated after the reporting date, then the inventory on the accounts would be adjusted to reflect the value that the inventory sold for. The physical sale of the inventory, although it occurs after the reporting date, is evidence of the value of the inventory so the event would adjust the accounts. These events only affect items that appear on the balance sheet. In the example, the condition here is that the inventory has a realisable value existing at the year end, and the event is the sale of the inventory.

If an event condition is not existing at the time of the reporting year end date then a disclosure must be made. An example of this would be a fire occurring within a building and destroying it completely. The loss of the building due to the fire would be disclosed, but no figures in the accounts would be affected. The disclosure would have to record the nature of the event and an estimate of the financial effect on the business. If no estimate can be given then the disclosure must include a statement to reflect this. Disclosures can be provided in the notes section of the annual accounts.

If a set of accounts are approved by a director or owner and submitted, if an event occurs then the accounts do not need to be retracted and amended. Companies House will not allow accounts to be removed (an amended set can be posted and added to the company’s files) from their database so the effects of any events after then can wait until the next set of annual accounts to be prepared.

Tags: annual accounts, limited company accounts, limited company