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Hello Mr Mike,
How are you? Hope you are fine.My question is about IAS 37 & IAS 10 and their effect on the financial statements.
Suppose the company year end is 31/12/2015! Now please let me consider two extreme scenarios:
Case 1: The company’s managers officially announce ON 30/12/2015 that they want to do a significant restructuring at cost of $1M in next 6 months! So according to IAS 37 we should make a provision of $1M in the financial statements for year ended 2015!
Case 2 – The company’s managers officially announce ON 1/1/2016 that they want to do a significant restructuring at cost of $1M in next 6 months! So according to IAS 37 we should make a provision of $1M but according to IAS 10, it is an un-adjusting event and so we should ONLY disclose the matter in the financial statements of year ended 2015 and we should recognise the provision cost on the year ended 2016!
Now my questions are :
1 – Am I correct ?!
2 – If I am correct, then this is a technique that can be used by managers to somehow delay the recognition of the cost! Yes ?!!Thank you in advance,
Kind RegardsYes, you are correct
But, as you started, these are extreme examples
The timing of the announcement determines whether to provide or merely disclose and obviously that one day makes a difference
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