05 June 2024
PURCHASE -INV,NO,25/DT.15.02.2024 FOR 2000 USD MADE IN THE YEAR 23-24
FOR ABOVE INV. SELLER SENT CREDIT NOTE FOR 500 USD VIDE CREDIT NOTE NO.01/DT.04.04.2024
WE ACCOUNTED PURCHASES IN 23-24. BUT AS PER IAS 10 IS IT NECESSARY TO RECORD THIS CREDIT NOTE TRANSACTION IN THE YEAR 23-24 , INSTEAD OF YEAR 24-25 ( AS -10 ,EVENTS AFTER REPORTING PERIOD. )
09 July 2024
According to IAS 10 (Events after the Reporting Period), events that occur after the reporting period but before the financial statements are authorized for issue (typically the approval of financial statements by management and board) fall into two categories:
1. **Adjusting Events**: These are events that provide further evidence of conditions that existed at the end of the reporting period (year-end) and require adjustment of the amounts recognized in the financial statements. Adjusting events are those that provide evidence of conditions that existed at the end of the reporting period (e.g., evidence of impairment of assets that existed at the reporting date).
2. **Non-Adjusting Events**: These are events that are indicative of conditions that arose after the reporting period and do not require adjustment of the amounts recognized in the financial statements. Non-adjusting events may include significant business combinations, major litigation settlements, or losses due to natural disasters occurring after the reporting date.
### Application to the Credit Note Transaction:
In your case:
- **Purchase Invoice**: Dated 15th February 2024, for 2000 USD. This is within the reporting period for the financial year 2023-24.
- **Credit Note**: Issued on 4th April 2024, for 500 USD. This is after the reporting period for the financial year 2023-24.
Since the credit note was issued after the reporting period (after 31st March 2024, assuming your financial year-end is 31st March), it falls under the category of **non-adjusting events** as per IAS 10.
### Treatment under IAS 10:
- **Non-Adjusting Event**: According to IAS 10, non-adjusting events are not recognized in the financial statements for the reporting period. Instead, they may require disclosure in the financial statements if they are material and relevant to understanding the financial position and performance of the entity.
- **Disclosure**: It is recommended to disclose the existence of the credit note and its financial impact (500 USD) in the financial statements of the subsequent period (year 24-25). This disclosure ensures transparency and provides stakeholders with information about subsequent events that may affect the entity's financial position.
### Conclusion:
Under IAS 10, the credit note transaction for 500 USD received after the reporting period (23-24) should not be recorded in the financial statements for the year 23-24 as an adjusting event. Instead, it should be disclosed in the financial statements for the subsequent period (24-25) if it is material and relevant. This approach aligns with the principle of reporting events accurately and transparently while distinguishing between adjusting and non-adjusting events as per international accounting standards.
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