According to the Person and Company Law (PGR), the nature and financial impact of significant events after the balance sheet date that are neither included in the income statement nor in the balance sheet must be disclosed in the notes. (Art. 1092 para. 2 PGR) The law does not provide any further details on this.
In accounting practice, a distinction is made with regard to events after the balance sheet date between those whose cause already existed on the balance sheet date and those whose triggering cause only occurred after the balance sheet date This applies to both positive and negative events that occur between the balance sheet date and the approval of the annual financial statements by the responsible body. The nature of the event and an estimate of the financial impact must be disclosed. If an estimate is not possible, this must be stated. If the cause of an event already exists on the balance sheet date, the event must be recognized in the financial statements for the past financial year if the company receives additional information after the balance sheet date. If the triggering event occurs after the balance sheet date, the event is generally not recognized in the financial statements, but must be disclosed in the notes.
If an event occurs after the balance sheet date that impairs the company’s ability to continue, this is an exception In this case, it is no longer permitted to prepare the annual financial statements on the basis of going concern values.
The following are some examples of events after the balance sheet date and their treatment in the accounts:
- If a debtor becomes insolvent after the reporting date, a valuation allowance must be recognized for the receivable.
- Negative or positive court rulings in proceedings that began before the reporting date must be taken into account in the balance sheet
- If a major natural disaster damage occurs at a significant production facility after the balance sheet date but before the annual financial statements are prepared, this is an event that must be disclosed but not booked.
- The reporting date principle also applies to negative price developments after the reporting date, which means that price declines on current assets are charged to the period in which the decline occurs For example, negative price developments in foreign currencies, securities or inventories arising in the new period – the latter subject to loss-free valuation – are not to be recognized in the old financial statements, but their financial effects are to be disclosed in the notes if necessary.
- As the balance sheet is prepared as at a reporting date, the legal situation on that date is generally authoritative. If, by way of exception, certain business transactions are still to be recognized in old financial statements by contractual agreement, these are to be valued in the old period. However, the corresponding contract itself may not be backdated
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