SSAP17 (Accounting for post balance sheet events) requires
events arising after the balance sheet date to be taken into
account when they provide evidence of conditions existing at that
date and materially affect the amounts to be included. A post
balance sheet event is one that occurs between the balance sheet
date and the date on which the financial accounts are approved by
the Directors. Events which take place after the accounts are
approved are not included within the standard, but if they are
material the Directors should consider publishing the material so
that the users of the financial statements are not misled. The
events may be favourable or unfavourable to the trader.
In the case of a company the date of approval of the accounts
is a convenient cut-off point to review post balance sheet events.
This will normally be the date of the board meeting at which the
financial statements are formally approved. For unincorporated
businesses the corresponding date will be the corresponding point
of review. Where a partnership has a formal procedure to approve
accounts such approval might provide a convenient cut-off point.
Not all post balance sheet events should be taken into
account in arriving at the figures in the financial statements.
SSAP17 divides events occurring after the balance sheet date in two
categories: 'adjusting events' and 'non-adjusting events'.
The principle is that adjusting post balance sheet events need
to be taken into account. Where for example work-in-progress is
ascertained some time after the balance sheet date the review
undertaken at that time will reflect post balance sheet events up
to that time. It would be unusual for a subsequent review to be
needed. Common sense obviously needs to be used in determining
whether subsequent material events are likely to occur after the
time of the initial review.
Example
A farming company had one of its crops destroyed, after the
balance sheet date but before the accounts were completed, by a
disease which was present, albeit undetected, in that crop at the
balance sheet date. In the financial statements being prepared it
would be entitled to write that stock down to its nil net
realisable value as that would be an adjusting event. On the other
hand the destruction of a crop by fire, after the end of the
accounting period but before the accounts were completed, would be
a non-adjusting event. It would not justify writing down that stock
to a nil net realisable value in the financial statements being
prepared. However it may require a note to explain what has
happened.
The Courts have not tested the application of SSAP17 but the
remarks of Warner, J on pages 660, 670, and 680 in Symons v Lord
Llewelyn Davies’ Personal Representative and Others [1982]
56TC630, suggest that they would accept its correct application.
Moreover, where facts are available they are preferable to
speculative estimates. For tax purposes it is not acceptable to
ignore facts if by doing so an unreal loss is provided for.
