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OK the first topic for today is this I use den which is events after the reporting period.

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And let me now create some space for myself to explain Neil.

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You know that businesses they prepare their financial statements and when you have a month full financial

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year you are closing your financial period here.

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So usually your financial year is like from 1st January.

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It's not a compulsion but usually you have from 0 1 0 1 2010 8.

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Let's suppose or 2018 and you are closing your period on say 0 0 1 0 1.

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I'm sorry thirty first December.

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OK let me make it 20 19 so that it is more clear to us.

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OK we'll make it 20 19.

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So because it has just finished so 0 1 0 1 20 19 so you start from January and you prepare your financial

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statements until the next twelve months which is 30 first December.

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This is the closing of the year.

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Now this date this date which is thirty first December What do you call it.

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You call it a reporting date

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so this is the date until which you present your financial enough your financial statements.

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Now of course on 30 December your year finishes but you can not how to say prepare or submit the financial

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statements because you have to the last month of December you still need to close it.

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OK.

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You still need to check if you still need to make some innovations and then of course there are some

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adjustments that you have to check throughout the year whatever you have done.

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And plus you cannot present your financial statements which are internally prepared.

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These financial statements must be audited by someone.

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OK.

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I mean it is not possible that if I make financial statements and then I submit it to my shareholders

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they would not expect accept it.

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I mean because my financial statements they would say that there is a 5 million dollar of inventory

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OK there is inventory but is it really 5 million then I would say that I have three million dollars

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off receivables.

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Now how to prove that my receivables are really three million probably some of the cash has already

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been deceived and not reported on probably.

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What about the revenues are out of your revenues properly recorded.

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Did you take out all of your costs properly.

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So that should be your shareholders certainly.

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They neither have I nor do they have skills to check all of that.

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So what they do they hire some external auditors and they ask you to get your financial statements checked

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by the external auditors.

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So what we do usually that we prepare our financial statements here internally then we start checking

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these financial statements.

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If there are any errors Eddie omissions and the adjustments we need to make.

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Once we are ready here we we believe that together the financial statements are ready to be to get audited.

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We invite the external auditors and hear the external audit as will come and they will start checking

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the numbers and the figures and the financial statements and IFRS gives you a period of six months for

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this activity.

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This is the maximum period.

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So it means that if your financial statements are if your annual year is if you are a year and big as

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thirty first of December you have time until 30 06 2020 to present your financial statements and this

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date this date 30th June whichever you call it discard authorization it

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authorization date means that the date at which the financial statements are authorized for submission

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to shareholders.

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Now what will happen now.

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You can imagine that during this period of six months when you were working here during this period

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of six months there would be different types of events which wouldn't be happening.

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OK.

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So there are some transactions going on the business continues to operate the business is doing its

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activity and it is possible that some transactions will take place here which will ask you or which

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will force you to go back and make changes here or probably here.

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So you should remember.

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So there is one general idea.

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Sometimes students do believe that you know on thirty first of December I have prepared my I have closed

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my year and after closing my year I can not make changes.

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No.

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This perception is not correct.

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You have closed your year on thirty first of December during January or February or March or April or

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May until you have not presented financial statements.

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You have a right to make changes.

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So what will happen that what.

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Whatever type of transactions will happen here.

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You divide them into two categories.

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You divide them into two categories you call them adjusting events and you call them non adjusting events

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adjusting events.

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They require you to make changes

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in financial statements.

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You know on thirty first December 20 19.

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So it is possible that some transaction takes place in the month of March and that transaction I would

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regard it as adjusting event.

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Now what is an adjusting event.

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I'm going to explain.

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But first I'm extending you the logic.

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So it is possible that some transaction which will take place somewhere in the month of March 20 20

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or January 20 20 on February 20 20 it will force me to go back on thirty first of December and make

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changes in the financial statements which means that income statement I can change that I can increase

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or decrease the revenue or increase decrease the expenses or I can work with the balance you can make

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changes in the balance sheet.

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So such events are card adjusting events not adjusting events we just disclose.

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We do not make changes in the financial statements from the last year.

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We just disclose disclose means that we give information and additional notes.

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You remember you've got five financial statements income statement balance sheet Statement of Cash Flows

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statement of changes in equity and notes to the financial statement so that notes the financial statement

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you provide additional income additional information.

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You don't change the numbers and income statement.

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You don't touch income statement.

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You don't touch the balance sheet income statement and balance sheet remains as it is.

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You only give additional information in the disclosure notes.

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Now I'm sure that you must be thinking that.

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What are the adjusting events and what are the non adjusting events adjusting events that forced me

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to go back and make changes here.

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I will change the I guess I will change the B.S. after three months and that's really normal.

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You know you can make the changes you have the right you can just.

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I'll give you a simple example.

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You know for example you came to me and used that box set.

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This is the income statement for the last month.

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I prepared it.

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Today is January 5th or whatever and I want to submit it to you.

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And then I say that you know today's Thursday.

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You go and check it and please submit it to me on Monday.

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Just have one more look and bring it to me on Monday.

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So when I did not accept it from you on Thursday and I said bring it to me on Monday.

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So essentially speaking I'm giving you time to make and find out and check it again.

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And if you find any mistake in that you have a right to correct it.

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And that's why I gave you this.

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You know why did I give you a treatise that go check it if there is any error or mistake Please correct

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it and then bring it to me on Monday.

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So similarly the year ends here but shareholders say give me this financial statements on 30th of June.

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And during that period if any mistake is identified any fraud is identified.

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Any added is identified any omission is identified.

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Please corrected because we don't want to give the wrong information to shareholders.

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So this is the general idea not adjusting events that are what adjusting events.

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How do you write it.

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You know you write it like that a events which

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provide further evidence of conditions existed at the reporting date conditions

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events which provide further evidence of conditions which existed at the reporting date which mean that

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any particular transaction which already was present on thirty first of December and you'll get some

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further information.

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Further information about that particular transaction.

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So it was recorded here.

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You can consider you know your provision a very common example I give you a provision for example what

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happened that someone during the year here some customer has taken you to court and there is a legal

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case going on and you know that there is a big possibility that you will be fined because according

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to the contract you must be the compensation but the amount of compensation is not decided on until

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thirty first of December.

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This 30 first of December comes in and until this date the case has not been agreed but based on your

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judgment based on your judgment what do you did that you just created an estimate and you created one

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hundred thousand dollar provision.

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You knew that approximately this much will be defined.

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So what do you did.

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You said you know -- it legal expenses and credit provisions because on thirty first of December thirty

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first of December you better know that how much will be the fine.

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Exactly.

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But you created an estimate on thirty first of December debit legal expenses credit provisions.

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Then what happens somewhat in the month of February.

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The case is decided now.

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This is the case now.

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This is what as evidence of conditions which existed at the reporting date.

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So on reporting date we had some evidence of that on reporting date.

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We knew that there is a legal case going on it is not something which has certainly appeared in 2020.

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This is a debate.

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This is a transaction.

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This is an argument which was which started in 2019 and it was present on my financial statements on

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20 19 in February.

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We just got the decision and the court has find you.

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Us suppose I don't know.

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Hundred and ten thousand.

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Good sir.

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OK.

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Your fine is real fine is a hundred and ten thousand.

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Then you go back and the case.

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And when did it happen.

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Let's suppose it happens on 20 at the February 20 20.

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The court decides fine four dollars hundred and ten thousand.

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Then you come back.

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Now there is no need for provision you would say big provisions.

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Hundred thousand.

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So what I'm doing I am removing the provision.

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So this transaction I'm going to make change on thirty first of December so GEERS was decided on this

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date but I go back to thirty first of December and I make adjustment.

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I said there is no need for provision.

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I removed the provision Dabiq and I would say you know Dabiq legal expenses ten thousand because previously

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I recorded legal expenses only a hundred thousand here I recorded a hundred thousand so ten thousand

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I need for that and I would say credit liability and now I create a clear cut liability it is no more

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than an uncertain liability it is no more a provision it is a liability because what happened that back

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then on 34 December I just created legal expenses.

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Hundred thousand.

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OK so ten thousand I need to create more and provision was also hundred thousand.

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So this provision I just remove I removed the provision I did move and I added back ten thousand further

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because the total legal expenses.

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Hundred and ten thousand going to be now.

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So I charge ten thousand more because hundred we made before and I bought now and I create a clear liability

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I said tax a liability no I don't need a provision so this is just one example of existing events there

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are many we are going to love but with a very simple example what I wanted to do that I wanted to show

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you that this this this court case which was decided somewhere in here in February actually this is

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something which started from the last year.

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So usually the adjusting events are those events which related to your previous yet activity.

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Okay now what I'm not adjusting events we are going to discuss

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OK so this is adjusting event and this is actually a standard which they usually include an exam a small

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adjustment comes in that that something which happened in January and February and you can see that

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is it adjusting or not adjusting etc. So we will discuss that.

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Now let me move all this stuff and we start the chapter.

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It says that definition events after the reporting period are those events both favorable and unfavorable

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that occurred between the end of reporting period and the date when the financial statements are authorized

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but issue.

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So that six months period there are two types of events after the reporting period.

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You called them adjusting events and you call them non adjusting so adjusting these provide evidence

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and please use the word further evidence further evidence of conditions which existed at the end of

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the reporting period non adjusting events.

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These relate to conditions which arose after the reporting period.

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So not adjusting those events which are actually happening after the reporting what could be after the

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reporting period.

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A very common example could be fire.

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Let's suppose you know you have in your inventory one million dollars worth of goods and then in January

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there is a fire and probably all of that has burnt you have not yet presented your financial statements.

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Are you going to go and tell your shareholders that that is a 1 million dollar inventory.

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So when you present your financial statements on 30th of June or totally get off 30 first off me.

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30th of April whatever date what would what are you going to tell them.

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How much is the inventory on the balance sheet.

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You will definitely show it one million you will say.

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Inventory is 1 million because this fire is a non adjusting event because on thirty first of December

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we never knew that defied would happen.

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This is not an event which is coming from the previous date.

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We had no doubt or we had no fear of that fire.

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So it's a non adjusting event however however because your your inventory is already burned.

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What do you should do.

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You should you should disclose

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you should disclose act like I will not decrease the inventory value and balance sheet in balance sheet.

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I will call it 1 million.

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Okay let's not call it a million because I have to explain something.

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Let's call it hundred game OK because a million I want to play for.

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Let's call it hundred thousand so hundred thousand of inventory I'm in show on the balance sheet.

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As it is on balance sheet I will not change back on.

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Disclosure notes I will disclose.

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I will tell this additional information to shareholders that listen the inventory which is shown on

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the balance sheet it does not exist anymore.

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It was burned but because it's a non adjusting event so I did not change the balance sheet.

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I kept it there but I am just giving you information.

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Listen.

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What do we do with financial statements.

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The purpose of financial statements is to provide information information which is true and fair view

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information which is complete which is unbiased which is you know free from any biased which is neutral.

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That is what we have to provide.

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So how do I provide information.

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Either I provide information through income statement or balance sheet or I provide information through

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the additional notes.

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So I am not putting it here but I will put it here so that shareholders that they do not go to the warehouse

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and start looking for the inventories that are the inventories you say one million dollars.

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I don't see it.

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I put it in disclosure.

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No that don't go to the White House.

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There is nothing left there.

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So usually fire is a non adjusting event but but that is one backed if that is some event which may

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be a non adjusting event.

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Now that is an exception remember not what I'm going to tell you is an exception is an exception.

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And you should remember because sometimes they try to check you with exceptions.

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I see that an event maybe not adjusting by nature.

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Such as fire.

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But if it is so significant.

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That it creates

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doubts on the growing concerns darkness going concern.

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You remember the safety of the business the business which is safe which is not going to go bankrupt.

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Stuff like that that go to your survival is at stake.

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But I say that there are doubts on the going concern which means that the survival of the business is

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at stake then it must be reported as adjusting event

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and change the emphasis and James the financial statements.

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Now that is an exception you need to remember that it is possible that there is some event which by

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nature by definition looks not adjusting but the size and scale of that event is so significant.

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It is so much detail it is so big that you cannot just disclose it.

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Now you should pray.

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You should bake it and treat it as as adjusting event and go back and change the numbers because you

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are your survival is at stake.

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OK.

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So financial statements me always because the underlying assumption of presenting the financial statement

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is that the financial statements are presented as a going concern.

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That is the first in the first line in your conceptual framework that the basic understanding is that

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the business is safe.

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Business is healthy and it is not facing any risk of bankruptcy or closing down.

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So if any such event has happened so it means that those financial statements are not any more going

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concern financial statements so you must go back and change the numbers.

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So this is an exception here.

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Just to given the examples of adjusting events include insolvency of a customer with a balancing act

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the reporting date like you have a receivable of some particular customer and that customer becomes

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a bad debt.

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I mean I have to receive hundred thousand from Alpha Company Alpha Company goes bankrupt.

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I cannot go in February and tell my shareholders that we have to receive hundred thousand from Alpha.

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We know that Delphi has already gone bankrupt.

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We know that Delphi is not going to pay any money.

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Then why do I show it in my balance in my balance sheet as receivable.

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Why do I tell my shareholders it is a symbol that would be not fair.

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That is very unfair.

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So Braddock's gone.

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So that is an adjusting giving sale of inventory after the reporting period for less than it's getting

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value at the end of reporting period.

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Which means that on your balance sheet you have put something as hundred dollar but then that's the

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minimum value like the load off cost tended not to be because you always show inventory at the lowest

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cost lower of cost or anatomy and you have picked up a value of hundred dollar.

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But then what happens is that in February you saw these goods for empty dollars so this is an adjusting

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event.

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You should go back to your financial statements on thirty first of December and make this hundred as

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eighty and recorded as 80 evidence of an impediment of a non-current acid prior to the end of the reporting

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period.

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So if there is some impairment of a non Ambassador prior to the end of prior to the end of the reporting

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period that you just got an evidence that the asset was in big before not now like Assad to Assad in

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bed in November.

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You got news in February or you just made a bit of my best in February and beauty veldt in February.

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But actually it was big before so that is also an adjusting of it.

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The outcome of a legal case which was provided for the reporting date.

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This was my first example I told you that you created some provision for some legal case and then you

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say discovery of fraud on editors which shows that the financial statements were incorrect.

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Probably that is some mistake in the financial statements or maybe during the audit period while you're

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doing the audit of the financial statements you identified that there was some fraud which on thirty

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first of December you could not identify.

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You only identified it in March but it belonged to the last year.

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So this is also how to say you know you are adjusting event and usually the double entry for that the

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double entry for fraud.

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You would say dynamic administrative expenses and credit receivable usually because usually the frogs

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on about the customer's receivables that you know some customer paid money.

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00:24:11,000 --> 00:24:17,000
Your procurement or I'm sorry your sales department or accounting department collected receivable but

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00:24:17,000 --> 00:24:18,000
they did not show it.

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So in your books it looks like that the customer still owes the money so customer owes you twenty thousand

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dollars.

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Back in March when you tried to reconcile with the customer customers said that I owe you nothing.

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I already have a view I already have paid the money to your accounting department to an accountant or

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to your I don't know manager or to your sales department recovery department or whatever.

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So now you cannot blame customer to give twenty thousand more because he has given you evidence of the

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payment.

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So customer balance you decrease you say to credit receivable and you charge it to your administrative

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expenses and then you try to find out how to take a break from your employee tax as a second stage.

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So these are some adjustments at some event.

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Examples of off adjusting events.

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Few more the financial statements should be amended to include the effect of the adjusting events should

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be amended.

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00:25:15,000 --> 00:25:18,000
It means that you should be changing your financial statements.

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00:25:18,000 --> 00:25:24,000
You should be changing the number in the income statement increase or decrease in revenue one increase

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or decrease in expenses.

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And of course the corresponding changes in the balance sheet.

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And this is likely to get the recognition of a loss in profit or loss.

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00:25:36,000 --> 00:25:39,000
So there is some loss which is going to happen in your being.

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So these audio and adjusting events.

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Let's see what are the examples of non adjusting events.

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For example the first one we say announcement of a plan to discontinue an operation.

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So in the month of January you decided that we are going to stop some activities or stop some operation

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or stop some product.

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This decision was taken in January.

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00:26:04,000 --> 00:26:05,000
It has got nothing to do with that.

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00:26:05,000 --> 00:26:07,000
It is not an adjusting event.

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00:26:07,000 --> 00:26:08,000
It is.

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00:26:08,000 --> 00:26:11,000
It is non adjusting event share transactions.

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00:26:11,000 --> 00:26:13,000
After the reporting period.

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00:26:13,000 --> 00:26:20,000
If you issue shares here major purchases and disposal of assets all they are they belong to the current

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year 2020.

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00:26:21,000 --> 00:26:24,000
They have got nothing to do with the previous year.

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00:26:24,000 --> 00:26:27,000
Litigation commenced after the reporting period.

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00:26:27,000 --> 00:26:31,000
So before we discuss the litigation which started in the month of October.

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00:26:32,000 --> 00:26:38,000
But if litigation started in January and it finishes in February then it is a non adjusting event.

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00:26:39,000 --> 00:26:40,000
OK.

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If the litigation started off and back because it has no evidence maybe it is a ticket to the prior

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00:26:45,000 --> 00:26:46,000
obedient.

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00:26:46,000 --> 00:26:51,000
Maybe it is related to the property and you saw some goods here but the customer did not take you the

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00:26:51,000 --> 00:26:54,000
litigation customer took you litigation in January.

348
00:26:54,000 --> 00:27:00,000
So on thirty first of December we have no evidence of about this litigation.

349
00:27:00,000 --> 00:27:03,000
So that is a non adjusting event.

350
00:27:03,000 --> 00:27:09,000
I mean the contract probably belongs to the previous year but if the litigation did not stopped then

351
00:27:09,000 --> 00:27:10,000
you can not report it.

352
00:27:10,000 --> 00:27:17,000
Then you take it as non adjusting of it and the acquisition off or disposal off a subsidiary after the

353
00:27:17,000 --> 00:27:18,000
reporting period.

354
00:27:18,000 --> 00:27:21,000
You got some subsidiary audio display some subsidiary.

355
00:27:21,000 --> 00:27:22,000
These are examples and on.

356
00:27:22,000 --> 00:27:28,000
Just to give it so what type of questions usually come in here.

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00:27:28,000 --> 00:27:35,000
I mean they will tell you some type of sales transaction you know events after that it will be again

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that you saw some goods and the customer turned back or probably some bad that happened.

359
00:27:41,000 --> 00:27:46,000
Probably some you know sell off some sale of some non investor.

360
00:27:46,000 --> 00:27:52,000
This type of small condition they will create which will make it to market three marks adjustment and

361
00:27:52,000 --> 00:27:55,000
exam during your consolidation question or some other question.

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00:27:56,000 --> 00:27:59,000
So it's not a very serious topic.

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00:28:00,000 --> 00:28:02,000
So I.

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00:28:03,000 --> 00:28:06,000
So these are some very typical examples.

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00:28:06,000 --> 00:28:11,000
So the non adjusting events the nature of the event and an estimate of the financial effect is disclosed.

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You just disclose it into the financial statements.

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00:28:15,000 --> 00:28:21,000
And this assumes that the non adjusting event is material to the financial state so because they are

368
00:28:21,000 --> 00:28:22,000
material.

369
00:28:22,000 --> 00:28:28,000
So you put them into their financial statements and in as a as a disclosure note

370
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no.

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So this is all with this chapter.