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ACCA Strategic Professional · Strategic Business Reporting (International) · Presentation and disclosure in financial statements

Delta Group's reporting date is 31 December 20X5 and its financial statements were authorised on 28 March 20X6. During February 20X6 the directors decided to cease operations of a subsidiary and began negotiating a sale, with the board's formal plan approved on 5 March 20X6. Which approach is consistent with IAS 10 and related standards?

No provision or held-for-sale classification is made at 31 December 20X5; the plan is disclosed as a non-adjusting event. The decision and plan arose after the reporting date, so the recognition criteria were not met at that date, but its nature and estimated financial effect must be disclosed.

  1. ARecognise a restructuring provision at 31 December 20X5 because the decision relates to 20X5 activities
  2. BClassify the subsidiary as held for sale at 31 December 20X5 since the sale was highly probable by authorisation date
  3. CDo not recognise a provision or reclassify at 31 December 20X5; disclose the nature and estimated financial effect of the non-adjusting eventCorrect
  4. DMake no disclosure because the decision was not an external event

Explanation

The decision and plan arose after the reporting date, so no obligation or held-for-sale criteria were met at 31 December 20X5. Announcing a plan to discontinue operations after the period is a non-adjusting event under IAS 10, requiring disclosure. Reclassifying at year end would use post-period conditions.

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