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Accounting Principles: Events After the Balance Sheet Date - Essay Example

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Accounting Principles: Events After the Balance Sheet Date

This area of accounting standards is related to events, both favourable and unfavourable, that occur after the financial statements are prepared and are relevant to the contents of the financial statements. This paper examines some key elements of IAS 10. It begins by identifying the background and basis for the Accounting Standard, and goes on to identify its practical application, and in so doing, identifies some key components of Events after Balance Sheet Date. The paper also reports comparative analyses between the IAS and the US Generally Accepted Accounting Practice (GAAP). Background of IAS 10 Generally, accounts are prepared over a period of 12 months (Accounting Coach, 2011). However, in practice, the people who are ultimately responsible for the accounts are the board of directors (Accounting Coach, 2012). Therefore, the authorization of the accounts by the board of directors is the most important validation point of the financial statement prepared by the accounting department. In most situations, accounts are authorized two to three months after the end of the period. It is typical that accounts prepared for December in a given year will be authorized in February or March by the board of directors. The International Accounting Standards Board emphasizes the need for cut-offs and consistency in financial statements (2009). ...
fter the Balance Sheet Date “Events after balance sheet date are events occurring between the balance sheet date and the date on which the finalised statements are approved by the board of directors” (Ramachandran & Kakani, 2009, p. 412). This means that they are the incidents and events that occur between the cut-off period for the financial statements and the time the accounts are approved by the board of directors, including activities that give further explanation and understanding of the information captured within the period. IAS 10 provides two broad headings under which events after balance sheet date could fall. First, there are events that provide evidence of the conditions that existed at the balance sheet date. Second, there are events that are indicative of conditions that arise after the balance sheet date. Adjusting and Non-Adjusting Events Some events require that some aspects of the balance sheet are changed. Other events require that the balance sheets are maintained; however, they are essential and might require some kind of disclosure to give the users of the financial statements better information and insight about the financial position of the company during the period. Adjusting events are events that give additional information about evidence of the conditions that existed at the balance sheet date. In other words, they provide important information about figures recorded within the cut off period [i.e., the period for which the financial statements were prepared]. Non-adjusting events are those events that are indicative of conditions that came into existence after the cut-off period. In other words, they are events that provide insight into the activities that occurred after the financial statements were prepared. However, they do not ...Show more

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This area of accounting standards is related to events, both favourable and unfavourable, that occur after the financial statements are prepared and are relevant to the contents of the financial statements…
Author : jonathonwolff
Accounting Principles: Events After the Balance Sheet Date essay example
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