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TMI BlogContingencies and Events Occurring After the Balance Sheet DateX X X X Extracts X X X X X X X X Extracts X X X X ..... following subjects, which may result in contingencies, are excluded from the scope of this Standard in view of special considerations applicable to them: (a) liabilities of life assurance and general insurance enterprises arising from policies issued; (b) obligations under retirement benefit plans; and (c) commitments arising from long-term lease contracts. Definitions 3. The following terms are used in this Standard with the meanings specified: 3.1 A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence, or non-occurrence, of one or more uncertain future events. 3.2 Events occurring after the balance sheet date are those significant events, both favourable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations have been incurred. 4.3 The uncertainty relating to future events can be expressed by a range of outcomes. This range may be presented as quantified probabilities, but in most circumstances, this suggests a level of precision that is not supported by the available information. The possible outcomes can, therefore, usually be generally described except where reasonable quantification is practicable. 4.4 The estimates of the outcome and of the financial effect of contingencies are determined by the judgement of the management of the enterprise. This judgement is based on consideration of information available up to the date on which the financial statements are approved and will include a review of events occurring after the balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is remote. 5.6 Provisions for contingencies are not made in respect of general or unspecified business risks since they do not relate to conditions or situations existing at the balance sheet date. 6. Accounting Treatment of Contingent Gains Contingent gains are not recognised in financial statements since their recognition may result in the recognition of revenue which may never be realised. However, when the realisation of a gain is virtually certain, then such gain is not a contingency and accounting for the gain is appropriate. 7. Determination of the Amounts at which Contingencies are included in Financial Statements 7.1 The amount at which a contingency is stated in the financial statements is based on the information which is availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and experience provides a means by which the amount of the liability or loss can be estimated with reasonable precision although the particular transactions that may result in a liability or a loss are not identified. Provision for these costs results in their recognition in the same accounting period in which the related transactions took place. 8. Events Occurring after the Balance Sheet Date 8.1 Events which occur between the balance sheet date and the date on which the financial statements are approved, may indicate the need for adjustments to assets and liabilities as at the balance sheet date or may require disclosure. 8.2 Adjustments to assets and liabilities are required for events occurring after the balance sheet date that prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t date but before the financial statements are approved for issue, the dividends are not recognised as a liability at the balance sheet date because no obligation exists at that time unless a statute requires otherwise. Such dividends are disclosed in the notes. 8.6 Events occurring after the balance sheet date may indicate that the enterprise ceases to be a going concern. A deterioration in operating results and financial position, or unusual changes affecting the existence or substratum of the enterprise after the balance sheet date (e.g., destruction of a major production plant by a fire after the balance sheet date) may indicate a need to consider whether it is proper to use the fundamental accounting assumption of going concern in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents Occurring after the Balance Sheet Date 13. Assets and liabilities should be adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date or that indicate that the fundamental accounting assumption of going concern (i.e., the continuance of existence or substratum of the enterprise) is not appropriate. 14. If an enterprise declares dividends to shareholders after the balance sheet date, the enterprise should not recognise those dividends as a liability at the balance sheet date unless a statute requires otherwise. Such dividends should be disclosed in notes. 15. Disclosure should be made in the report of the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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