If provision for Bonus was taken in 2007 for X amount and financial statements for 2007 closed and reported , and in 2008 the payout of Bonuses was more than the provisions amount. As per IFRS , what is acceptable??
1- should we classify the over expensed amount as Prior year expenses ( is this accp as per IFRS )
2- should i expense this amount in 2008 ?
I used to do this as prior year expenses , but i heard that as per IFRS now we should expense it in the payout period , can anyone confirm plz?I am quoting from:
An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the balance sheet date.
The following are examples of adjusting events after the balance sheet date that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:
(d) the determination after the balance sheet date of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the balance sheet date to make such payments as a result of events before that date (see IAS 19 Employee Benefits).”
Taking into consideration that the obligation to pay the bonuses is based on performance in 2007, the obligation in the Balance Sheet should reflect the correct amount.
I would adjust.
From what I understand, the accounts have been closed and reported and hence have already been authorised for issue. In this case the excess needs to be expensed this year with suitable disclosures in the profit and loss account and provisions movement for the current year.
Provisions are supposed to be best estimates based on current conditions but it appears to be a regular feature from your email to have prior year adjustments. Going forward, perhaps the basis for the provisions should be revised?
> statementsfor 2007 closed and reported , and in 2008 the payout of
dear Tony,in general such amount should be expenses in the year 2008 since this is simply an error in the accounting estimate. while recording I think it should be considered whether the amount is material or not. If not material I propose you record in the general expense account. If materail then it is more appropriate to diclose separetly as “prior year expense”regardsFikretYes you can only adjust this in case the adjusting event is come to your knowlege before financial statement were issued.Shabi