Section 32 – 32.4 Recognition and measurement – Non-adjusting events after the end of the reporting period

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32.4 Recognition and measurement – Non-adjusting events after the end of the reporting period

32.4.1 Extract from FRS102: Section 32.6-32.7

32.6 An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the end of the reporting period.

32.7 Examples of non-adjusting events after the end of the reporting period include:

(a) A decline in market value of investments between the end of the reporting period and the date when the financial statements are authorised for issue. The decline in market value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure in accordance with paragraph 32.10.

(b) An amount that becomes receivable as a result of a favourable judgement or settlement of a court case after the reporting date but before the financial statements are authorised for issued. This would be a contingent asset at the reporting date (see paragraph 21.13), and disclosure may be required. However, agreement on the amount of damages for a judgement that was reached before the reporting date, but was not previously recognised because the amount could not be measured reliably, may constitute an adjusting event.

32.11 The following are examples of non-adjusting events after the end of the reporting period that would generally result in disclosure. The disclosures will reflect information that becomes known after the end of the reporting period but before the financial statements are authorised for issue:

(a) a major business combination or disposal of a major subsidiary;

(b) announcement of a plan to discontinue an operation;

(c) major purchases of assets, disposals or plans to dispose of assets, or expropriation of major assets by government;

(d) the destruction of a major production plant by a fire;

(e) announcement, or commencement of the implementation, of a major restructuring;

(f) issues or repurchases of an entity’s debt or equity instruments;

(g) abnormally large changes in asset prices or foreign exchange rates;

(h) changes in tax rates or tax laws enacted or announced that have a significant effect on current and deferred tax assets and liabilities;

(i) entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees; and

(j) commencement of major litigation arising solely out of events that occurred after the end of the reporting period.

32.4.2 OmniPro comment

32.4.2.1 Analysis

A non-adjusting post balance sheet event is an event that arose after the end of the reporting period as per section 32.3 of FRS 102 and which does not require adjustment but disclosure.

32.4.2.2 Example of non-adjusting post balance sheet date events

Detailed below are examples of non-adjusting events where disclosure would be required:

Decline in market value of investments since year end – non-adjusting post balance sheet event (Section 32.7(a) of FRS 102).
Favorable judgement in a court case after year end where judgement given pre-year end but not able to measure reliably – then an adjusting post-balance sheet event (Section 32.7(b) of FRS 102).
Favorable judgement in a court case after year end where it was considered remote that money would be received – then a non-adjusting post-balance sheet event (Section 32.11(c) of FRS 102).
A major business combination or disposal of a major subsidiary (Section 32.11(a) of FRS 102)
Announcement of a plan to discontinue an operation (Section 32.11(b) of FRS 102)
Major purchases of assets, disposals or plans to dispose of assets, or expropriation of major assets by government (Section 32.11(c) of FRS 102)
The destruction of a major production plant by a fire (Section 32.11(d) of FRS 102)
Announcement, or commencement of the implementation, of a major restructuring (Section 32.11(e) of FRs 102)
Issues or repurchases of an entity’s debt or equity instruments (Section 32.11(f) of FRS 102)
Abnormally large changes in asset prices or foreign exchange rates (Section 32.11(g) of FRS 102)
Changes in tax rates or tax laws enacted or announced that have a significant effect on current and deferred tax assets and liabilities (Section 32.11(h) of FRS 102). Here these would include changes in tax rates which were enacted after the balance sheet date. The effect of the change on tax on the deferred tax balance would need to be disclosed in the year end accounts.
Entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees (Section 32.11(i) of FRS 102) and
Commencement of major litigation arising solely out of events that occurred after the end of the reporting period (Section 32.11(j) of FRS 102).

Examples of non-adjusting events not mentioned in the standard are:

Subsequent rectification of a breach or default of covenants on loans, or the renegotiation of the terms of the loan is not an adjusting event therefore the liabilities should be shown within current liabilities in the financial statements at the year end.
Significant acquisitions or disposals made after the balance sheet date. Where there is a present and a binding agreement that has been entered into Section 4 of FRS 102 requires
- A description of the asset or disposal group
- Description of facts and circumstances about the sale
- The carrying amount of the assets or group of assets
Inventory physically damaged or destroyed after year end (whether by fire, flood or disaster etc.) is a non-adjusting event. Disclosure may be required where material.
Dividends declared after the year end (see section below).

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Example 1: Application.

Example 2: Recoverability of trade debtor balances.

Example 3: Indicators of impairment of PPE/land etc.

Example 4: Profit on sale of plant after year end following decision to close.

Example 5: Closing office and relocating.

Example 6: Other than Going concern disclosure.

Example 7: Extract for the approval of the financial statements.