IAS 10 Events after the Reporting Period
Financial statements take time to finish. IAS 10 deals with events between the reporting date (the year end) and the date the financial statements are authorised for issue. An adjusting event gives more evidence about a condition that already existed at the year end, so the figures are changed. A non-adjusting event reflects a condition that arose after the year end, so the figures are not changed, but a material one is disclosed in a note: its nature and an estimate of its financial effect. A dividend declared after the year end is not a liability at the year end. If, after the year end, the business is to be closed down, the going concern basis can no longer be used.
1 Introduction
Financial statements are not prepared on the last day of the year. After the year end the accountant has to finish the year-end adjustments, the auditors check the figures, and finally the directors approve the financial statements and authorise them for issue. This can easily take several months.
Until the financial statements are authorised for issue they can still be changed. IAS 10 Events after the Reporting Period says which events in that gap should change the figures, which should only be described in a note, and which can be ignored. It builds on Chapter 23: it is about getting the year-end accounting estimates right, and about the going concern assumption.
Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue.
Date | What happens |
31 December 2025 | Reporting date (year end). The financial statements show the position at this date. |
January to March 2026 | Year-end work and the audit. Events in this period are events after the reporting period. |
20 March 2026 | The directors authorise the financial statements for issue. IAS 10’s period ends here. |
Later (for example the annual general meeting) | The financial statements are final. Later events belong to next year’s financial statements. |
Like Chapter 25, this chapter is an optional extension: IAS 10 is not one of the topics named in the BA3 syllabus. Read it to understand how each kind of event is treated, and work the examples for practice; the full detail of IAS 10 is not covered.
2 Adjusting events
Adjusting events provide evidence of conditions that existed at the end of the reporting period. The amounts in the financial statements are adjusted, and any related disclosures are updated, to reflect the new information.
To decide, ask two questions:
Did the condition exist at the year end?
If we had known about it when the figures were drawn up, would we have shown things differently?
If the answer to both is yes, it is an adjusting event. Common examples:
Event after the year end | Why it is adjusting |
A customer who owed money at the year end goes bankrupt | The customer was usually already in financial difficulty at the year end. Had we known, we would have written the debt off or made an allowance for it (Chapter 8), so the receivable is reduced. |
Inventory held at the year end is sold for less than it cost | It shows the net realisable value at the year end was below cost, so the inventory is written down (Chapter 9) — unless something that happened after the year end, such as damage, caused the fall. |
An error or a fraud is discovered that shows the figures were wrong | The financial statements were wrong at the year end, so they are corrected. |
A court case is settled, confirming that the business had an obligation at the year end | The obligation existed at the year end; the provision (Chapter 25) is set up, or changed to the settled amount. |
The cost of an asset bought before the year end is finally agreed | The asset existed at the year end; its cost is corrected. |
3 Non-adjusting events
Non-adjusting events are those that are indicative of conditions that arose after the end of the reporting period. The amounts in the financial statements are not adjusted: the statements show the position at the year end, and at the year end the condition did not exist.
If a non-adjusting event is material — big enough that leaving it out could influence the decisions of users (Chapter 23) — it is disclosed in a note. The note gives:
the nature of the event; and
an estimate of its financial effect, or a statement that such an estimate cannot be made.
Common examples:
Event after the year end | Why it is non-adjusting |
A factory or warehouse is destroyed by fire or flood | The building existed and was undamaged at the year end. |
The business issues new shares or takes out a large loan | The shares and loan did not exist at the year end. |
The business buys another business | The purchase happened after the year end. |
The market value of investments falls because of market conditions after the year end | At the year end the investments were worth the year-end value. |
A customer has an accident on the premises after the year end and sues | There was no obligation at the year end (Chapter 25). |
The directors declare a dividend | There was no obligation to pay it at the year end. |
The last row is the rule you met in Chapter 16. A dividend declared after the year end, even one that relates to the profits of that year, is not a liability in the statement of financial position at the year end, because there was no obligation to pay it then; it is disclosed in a note. It is deducted from retained earnings in the next year, the year it is declared, and is a liability (dividends payable) from then until it is paid. A dividend that had been properly approved before the year end but was still unpaid would be different: it is a liability at the year end.
Kumar Industries’ year end is 31 December 2025. On 1 February 2026 its main factory, carrying amount $1,000,000, is destroyed by fire. The financial statements are authorised for issue on 20 March 2026.
The factory existed at the year end and was not damaged then, so it is still shown at $1,000,000 in the statement of financial position at 31 December 2025. The fire is clearly material, so a note is attached, for example:
“On 1 February 2026 the company’s main factory was destroyed by fire. Its carrying amount at 31 December 2025 was $1,000,000. The factory was insured, and the directors expect to recover $750,000 from the insurers.”
The loss is recognised in the financial statements for the year ending 31 December 2026, the year the fire happened.
4 Going concern
There is one exception to the rule that conditions arising after the year end are not adjusted for. If, after the year end, management decides to liquidate the business or to stop trading, or has no realistic alternative but to do so, the financial statements must not be prepared on the going concern basis (Chapter 23). This is not a matter of changing one or two figures: the whole basis on which the statements are prepared changes.
5 The date of authorisation
Because events up to the date of authorisation are taken into account, users need to know what that date was. The financial statements disclose the date they were authorised for issue and who gave that authorisation (usually the board of directors). Events after that date are not reflected in them at all.
6 Working through events after the reporting period
Okafor Electronics has a year end of 31 December 2025. Its financial statements are authorised for issue on 20 March 2026. The following happened after the year end:
On 10 January 2026 televisions that were included in closing inventory at their cost of $12,000 were sold for $9,000, with no selling costs. They were not damaged after the year end.
On 25 January 2026 a customer who owed $18,000 at the year end went into liquidation. The customer had been in financial difficulty for several months.
On 14 February 2026 a flood damaged the warehouse, destroying inventory that cost $50,000. The amount is material.
On 1 March 2026 it was discovered that a December sales invoice for $7,000 had been recorded twice.
On 5 March 2026 the company took out a long-term bank loan of $500,000 to buy a new factory.
On 10 March 2026 the directors declared a final dividend of $30,000 for the year ended 31 December 2025.
On 2 April 2026 the company’s largest customer cancelled its contract.
For each event, state whether it is an adjusting event, a non-adjusting event or outside the scope of IAS 10, and how it is treated in the financial statements for the year ended 31 December 2025.
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The draft financial statements of Lim Trading, a Malaysian company, show a profit of $240,000 for the year ended 31 December 2025. Before the financial statements are authorised for issue, the following come to light:
Inventory included at its cost of $15,000 was sold in January for $11,000. Selling costs of $500 were paid on the sale.
A customer who owed $6,000 at the year end was declared bankrupt in February. The customer had been in difficulty at the year end, and nothing will be recovered.
In February a fire destroyed a warehouse with a carrying amount of $80,000, a material amount.
At the year end Lim Trading had recognised a provision of $20,000 for damages in a court case about an accident before the year end. In February the court ordered Lim Trading to pay $26,000.
Calculate the revised profit for the year ended 31 December 2025.
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7 Summary
Type of event | Test | Treatment |
Adjusting | Gives evidence of a condition that existed at the year end | Adjust the amounts and update the related disclosures |
Non-adjusting | Indicates a condition that arose after the year end | No adjustment; if material, disclose the nature and an estimate of the financial effect (or say that an estimate cannot be made) |
Dividend declared after the year end | No obligation at the year end | Not a liability; disclose in a note |
Decision after the year end to liquidate or stop trading | Going concern no longer appropriate | Do not use the going concern basis |
Event after the date of authorisation | Outside IAS 10 | Not reflected in these financial statements |
The financial statements also disclose the date they were authorised for issue and who authorised them.
8 Test your knowledge
Two quick checks before you move on: work through the flashcards to fix this chapter’s terms and definitions, then sit the objective questions for exam-style practice. Both mark themselves and explain the answers as you go.
IAS 10 Events after the Reporting Period
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