Related Parties, Provisions and Events After the Reporting Date

A provision differs from a reserve, routine payable and contingent liability. An estimated future operating loss is not automatically a current obligation. A board decision to spend money does not always create the obligation required for recognition.

A company receives a legal claim before year-end and counsel later provides evidence about the condition existing at reporting date. Review recognition and measurement using the framework. If a major fire occurs after year-end and relates to a new condition, assess non-adjusting-event disclosure rather than automatically reducing year-end assets. The facts and timing determine the conclusion.

A director-controlled supplier should be identified in the related-party register, with transaction and balance disclosures considered even when invoices were paid promptly. Tax arm's-length and company-law conflict approvals are separate analyses.

Obtain representations supported by enquiry and evidence, not only a signed statement that “there are no related parties.” Review minutes, ownership, significant contracts and connected balances. Keep a documented subsequent-event review through the relevant approval/reporting date.

Do not use a provision to smooth profit, omit a contingent exposure because no cash has yet been paid, or treat every later receipt as evidence of year-end collectability. Assess each event and document the framework provision. Reconcile movements and disclosures to the ledger. Professional review remains necessary for material judgement, litigation and related-party matters before the article is used as entity-specific advice.

Management should identify relationships relevant to the reporting framework, including ownership, control, key management and other categories within the applicable definition. Registration documents, board records, contracts and declarations can each provide useful evidence. A supplier's company name may not reveal that a director's family controls it.

Track the transactions, outstanding balances, commitments and terms required for disclosure. A balance repaid before year-end can still arise from a transaction needing disclosure. Conversely, a familiar business name is not automatically a related party without the relevant relationship. Keep the population and the conclusion supported, then reconcile the disclosure amounts to the ledger.

A provision assessment examines an obligation arising from a past event, the likelihood of settlement and the reliability of measurement under the applicable framework. A future business plan or expected operating loss does not automatically create a present obligation. A possible obligation can require a different disclosure assessment rather than recognition as an ordinary payable.

For example, a company receives a legal claim relating to work completed before year-end. It obtains relevant facts and legal evidence, considers the obligation and outcome, and applies the framework. The amount demanded is not automatically the liability recognised, and a management statement that the claim is unfair is not sufficient evidence to omit the assessment.

Information received after the reporting date may confirm conditions that already existed, or describe a condition that arose later. That distinction affects whether figures are adjusted or the event is disclosed under the applicable standard. Identify the reporting-date condition, subsequent evidence and date the statements are authorised.

A customer bankruptcy shortly after year-end may provide evidence about recoverability at year-end. A fire occurring later can instead represent a new event, although its significance and going-concern effect still need consideration. The reporting paper should state the facts and reasoning. Applying a blanket rule that every later event is ignored until the next year would miss both adjustment and disclosure obligations.