Skip to content

ACCA Applied Knowledge · Financial Accounting · Events after the reporting period

Kestrel Co prepares financial statements to 31 March 20X6, authorised for issue on 30 June 20X6. On 15 April 20X6 the directors proposed a final ordinary dividend of $250,000 for the year ended 31 March 20X6, and it was approved by shareholders on 20 May 20X6. What is the correct treatment in the year ended 31 March 20X6 financial statements?

No liability is recognised, because the dividend was declared after the reporting date and there was no obligation at 31 March 20X6. The $250,000 is disclosed in the notes as a non-adjusting item. Approval before authorisation does not change this.

  1. ARecognise a liability of $250,000 and reduce retained earnings
  2. BRecognise the dividend as an expense in profit or loss
  3. CDo not recognise a liability; disclose the dividend in the notesCorrect
  4. DRecognise a provision because shareholders approved it before authorisation

Explanation

Dividends declared after the reporting period are not a liability at the reporting date because no obligation existed then. Under IAS 10 they are not recognised, but disclosed in the notes. Approval on 20 May is still after 31 March, so it does not create a year-end liability.

Did you get it right without looking?

One question tells you little. A timed set on Events after the reporting period shows your real accuracy, how long you take and where you lose marks.

Practise Events after the reporting periodFree diagnostic mock

More Events after the reporting period questions