“The present was an egg laid by the past that had the future inside its shell.”
It’s another edition of IFRS is easy.
I guess you would wonder why it took us so long to come up with this edition. It’s actually for the best. Guess you must have thoroughly digested our previous edition on IAS 8.
I have heard people make this statement a good number of times, “It’s no use crying over spilled milk.”
How true is this in the world of accounting? Can we touch the past while addressing the present? Are there situations that can be rectified even after the deed has been declared done? Even if they can be rectified, when can they be deemed fit for rectification? What steps should be taken and how can we manage the damage? Maybe this illustrative story will be of help.
*Kroon has two horses. He placed loads of equal weight on both horses, as they embarked on a seemingly long journey. The front horse went well, but the rear horse was lazy. Kroon began to pile the rear horse’s load on the front horse; when he had transferred it all, the rear horse found it easy going, and he laughed at the front horse, saying, “Toil and sweat! The more you try, the more you have to suffer.” The front horse didn’t care as it moved on assiduously. When they reached the tavern, the owner said: “Why should I fodder two horses when I carry all my loads on one? I had better give the front horse all the food it wants and cut the throat of the other; at least I shall have the hide.” The rear horse pleaded but it was too late. The decision had already been made. (Edited excerpt from the 48 Laws of Power, by Robert Greene)
Yea, the decision had already been made. In the world of accounting, just as the lazy horse’s plea fell on deaf ears, it is generally believed by lay-men that financial statements prepared by the financial year end are sacred and cannot be adjusted even when some crucial events occur after the year end. It is almost true but not totally true.
A window-period is allowed which we refer to as the cut-off period. During this period some specific nature of events are allowed to find their way into the financial statement even though they arose after all deeds have been done, that is, after the financial statements have been deemed to be completely prepared.
IAS 10 proffers justice to this worrisome aspect of preparing financial statements.
For a complete dosage, detailed examples and better clarification on the subject matter of IAS 10 –Events after the reporting period, , click below to view or download the pdf.
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