E63 Events after the balance sheet date

The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on the above exposure draft issued by the IASC. The exposure draft was considered at a recent meeting of the ACCA's Financial Reporting Committee the following are their views.

Our comments on the specific questions raised on pages 3 to 6 of E63 are as follows:

Q1.
Do you agree that:
(a) an enterprise should disclose the date when the financial statements are authorised for issue;
(b) an enterprise should disclose the name of the governing body that gives that authorisation;
(c) if the financial statements are subject to approval by the enterprise's owners, an enterprise should disclose that fact; and
(d) no detailed guidance is needed on how to determine the date when the financial statements are authorised for issue?

Yes, to all these questions.

Q2.
Do you agree that the Standard should permit, but not require, an enterprise to recognise dividends payable that are stated to be in respect of the period covered by the financial statements and that are proposed or declared after the balance sheet date but before the financial statements are authorised for issue?

No. We think that only proposed dividends where there is a legal or constructive obligation at the balance sheet date should be recognised in the financial statements. In other words we support the option (c) in the second part of the question. As to the definition of when a legal or constructive obligation exists, this is already covered in IAS37 on provisions, and we can see no reason why the case of dividends should need additional guidance compared to other sorts of provision.

Our reasons for opposing the treatment put forward in E63 are that

Optional treatments are inherently undesirable in accounting standards

any other sort of proposed dividend would not conform with the definition of a liability in IASC's framework, and would be

inconsistent with the definition of a provision in IAS37

The argument advanced by IASC in the text of Question 2 to E63 that there is no evidence that the existing optional teatments have caused inconvenience seems self-evidently inadequate.

Q3.
Do you agree that:

(a) an enterprise should not prepare its financial statements on a going concern basis if the events after the balance sheet date indicate that the going concern assumption is not appropriate;
(b) an enterprise should continue to prepare financial statements on a going concern basis for the whole enterprise if events after the balance sheet date indicate that part of the enterprise is not a going concern but the rest of the enterprise is a going concern?

Yes, to both questions.

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E63 Events after the balance sheet date