IAS 10 ‘Events After The Reporting Period” STATES when events after the end of the reporting period should be adjusted in the financial statements.
‘Adjusting Events‘ are those providing evidence of conditions existing at the end of the reporting period, WHEREAS ‘Non-Adjusting Events‘ are indicative of conditions arising after the reporting period.
What Is IAS 10?
IAS 10 – Events After the Reporting Period is an International Financial Reporting Standard issued by the International Accounting Standards Board (IASB). It prescribes the accounting treatment and required disclosures for events that occur between the end of the reporting period and the date on which the financial statements are authorised for issue.
The standard ensures that financial statements present a faithful picture of a company’s financial position, incorporating material information that became known after the balance sheet date but before investors and stakeholders receive the finalized statements.
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.
The Reporting Timeline
Three critical dates govern the application of IAS 10:
(Balance Sheet Date)
The authorisation date not the date the statements are published or presented to shareholders, is the cut-off point for applying IAS 10. This date must be disclosed in the notes to the financial statements.
Adjusting Events After the Reporting Period
Adjusting events are post-period events that provide evidence of conditions that existed at the end of the reporting period. Because these conditions already existed at the balance sheet date, the financial statements must be adjusted to reflect this new information.
Recognition Principle
An entity must adjust amounts recognised in its financial statements to reflect adjusting events. The adjustment is necessary because the event confirms or refines information about conditions that were present at period-end, even if that information was unknown at the time.
| Event | Why It Is Adjusting | Accounting Treatment |
|---|---|---|
| Settlement of a court case confirming a liability at period-end | Obligation existed at balance sheet date | Adjust provision to settlement amount |
| Discovery that an asset was impaired at year-end (e.g., a customer’s bankruptcy) | Credit risk existed at balance sheet date | Recognise or increase impairment loss |
| Sale of inventory after period-end below cost | Net realisable value (NRV) was below cost at year-end | Write inventory down to NRV |
| Determination of profit-sharing or bonus payments | Obligation existed at year-end under constructive obligation | Recognise liability at adjusted amount |
| Discovery of fraud or errors revealing incorrect financial statements | Errors existed at period-end | Correct financial statements |
| Final purchase price agreed for a business combination | Acquisition existed at period-end | Adjust provisional fair values (per IFRS 3) |
The key test for an adjusting event is: “Did the underlying condition exist at the balance sheet date?” If yes, adjust the financial statements regardless of when the confirming evidence emerged.
Non-Adjusting Events After the Reporting Period
Non-adjusting events are events that indicate conditions which arose after the reporting period. Because these conditions did not exist at the balance sheet date, the financial statements should not be adjusted. However, if the events are material, they must be disclosed in the notes to the financial statements.
Adjust Statements
- Condition existed at period-end
- Event provides confirming evidence
- Amounts in statements are changed
- No separate disclosure required if adjusted
Disclose Only
- Condition arose after period-end
- New condition, not pre-existing
- Amounts in statements are NOT changed
- Disclosure required if material
Examples of Non-Adjusting Events
| Event | Classification | Required Action |
|---|---|---|
| Decline in market value of investments after period-end | Non-Adjusting | Disclose if material |
| Major business combination announced after period-end | Non-Adjusting | Disclose nature and estimated financial effect |
| Major fire or flood destroying significant assets | Non-Adjusting | Disclose if material |
| Commencement of major litigation after period-end | Non-Adjusting | Disclose if material |
| Announcement of a plan to discontinue an operation | Non-Adjusting | Disclose if material |
| Abnormally large changes in asset prices or exchange rates | Non-Adjusting | Disclose if material |
| Entering into significant commitments or contingent liabilities | Non-Adjusting | Disclose if material |
Treatment of Dividends Under IAS 10
The treatment of dividends declared after the reporting period is one of the most commonly tested areas of IAS 10. The standard provides specific guidance that departs from what many practitioners might initially expect.
If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period, because no obligation existed at that date.
Why Dividends Are Non-Adjusting
Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, a liability can only be recognised when a present obligation exists at the balance sheet date. For dividends declared after the reporting period, no such obligation existed on the balance sheet date therefore:
Do not recognise the dividend as a liability in the statement of financial position at period-end.
Do not recognise the dividend as a deduction from equity at period-end.
Disclose the amount of the dividend (and the per-share amount) in the notes to the financial statements if material.
Students often incorrectly debit retained earnings and credit dividends payable for post-period dividends. Under IAS 10, no journal entry is made. Only a note disclosure is required. Dividends declared before the reporting date would, however, be recognised as a liability.
Going Concern Considerations
IAS 10 specifically addresses scenarios where post-period events affect the Going Concern basis of accounting. This represents a special case that can trigger fundamental changes to the entire set of financial statements.
When Going Concern Is Affected
If management determines, after the reporting period, that the entity is not a going concern, this is an adjusting event. The reason: the going concern basis permeates the entire measurement of assets and liabilities. If the entity cannot continue operations, assets may need to be measured at their liquidation values rather than historical cost or fair value under the going concern assumption.
IAS 10 states that an entity must not prepare its financial statements on a going concern basis if management determines after the period that it intends to liquidate the entity or cease trading, even if this decision was made after the reporting date.
Indicative Post-Period Events That May Trigger Going Concern Review
Significant financial losses revealed after period-end
Refusal by a key lender to renew loan facilities
Loss of a major contract or key customer after period-end
Regulatory action threatening the entity’s ability to operate
Board decision to cease operations or file for insolvency
Disclosure Requirements Under IAS 10
Disclosure obligations under IAS 10 fall into two categories: those required for all entities regardless of events, and those triggered by specific non-adjusting events.
1. Always Required: Authorisation Date
Every entity must disclose the date when the financial statements were authorised for issue and who gave that authorisation. This disclosure is mandatory regardless of whether any post-period events occurred.
2. Updates to Conditions Disclosed at Period-End
If a non-adjusting event relates to a condition that was disclosed at year-end (e.g., an unresolved lawsuit), the entity should update the related disclosure to reflect the current status of the condition.
3. Material Non-Adjusting Events
For each material category of non-adjusting event after the reporting period, the entity must disclose:
The nature of the event – a clear description of what occurred.
An estimate of the financial effect, or a statement that such an estimate cannot be made.
IAS 10 does not define a numerical threshold for materiality. Management must exercise Professional Judgement to determine whether an event is of such significance that its omission or misstatement could influence the economic decisions of users of the financial statements.
Sample Note Disclosure (Non-Adjusting Event)
Note X – Events After the Reporting Period
On [date], subsequent to the reporting date of [date], the Group entered into a binding agreement to acquire 100% of the issued share capital of [Company Name] for a total consideration of [amount]. The acquisition has not yet been approved by the relevant regulatory authority. This is a non-adjusting event. Management is currently assessing the financial impact of this transaction, which has not yet been reflected in these financial statements. The estimated fair values of the assets and liabilities acquired will be disclosed in the next annual report.
IAS 10 Decision Framework
When evaluating any post-period event, apply this structured decision process:
Identify the event. Determine what happened and when it occurred relative to the reporting date and the authorisation date.
Assess the timing. Does the event fall between the reporting date and the authorisation for issue date? If before the reporting date, it is not an IAS 10 event at all (it should already be reflected).
Test for pre-existing conditions. Ask: “Did the underlying condition exist at the balance sheet date?” Use all available evidence.
Classify the event. If the condition existed at period-end → Adjusting. If the condition arose after period-end → Non-Adjusting.
Apply the accounting treatment. Adjusting events: revise amounts. Non-adjusting events: disclose if material.
Review going concern. Separately assess whether any events impact the going concern assumption.
Confirm disclosures. Ensure the authorisation date is disclosed and all material non-adjusting events are adequately described.
Frequently Asked Questions
IAS 10 (IFRS) and ASC 855 (US GAAP) are broadly similar in principle but differ in terminology and some details. Under US GAAP, the term “subsequent events” is used. A key difference is that under IFRS, the cut-off is the “authorisation for issue” date, while US GAAP distinguishes between “recognised subsequent events” and “non-recognised subsequent events” using either the issuance date or, for SEC registrants, the date available for issuance.
The authorisation date is when management formally approves the financial statements for release. For most entities, this is the date the board of directors approves the statements. For some entities, approval by a supervisory board is required before issue – in that case, the supervisory board approval date is the authorisation date. This date must be disclosed in the notes.
IAS 10 does not govern events after the authorisation date. Events occurring after the statements have been issued are governed by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) if they reveal prior-period errors. For re-issuance of already-published statements, IAS 10 would apply once again up to the new authorisation date.
The IASB clarified that for periods ending 31 December 2019, the COVID-19 outbreak was a non-adjusting post-balance-sheet event because the World Health Organization declared it a pandemic in March 2020, after the reporting date. However, for reporting periods ending after the outbreak was publicly known (e.g., 31 March 2020 onwards), its effects would need to be factored into period-end measurements. Each reporting date and fact pattern must be evaluated separately.
Generally, no. A change in tax law enacted after the reporting date is a non-adjusting event under IAS 10 because the new law did not exist at the balance sheet date. The deferred tax amounts at period-end are measured based on laws that were enacted or substantively enacted at the reporting date (per IAS 12 Income Taxes). However, this must be disclosed if the financial impact is material.
IAS 34 (Interim Financial Reporting) incorporates the principles of IAS 10 for interim periods. Entities should apply the same logic i.e. adjusting events that confirm conditions at the interim period-end require adjustment, while new conditions arising after the interim reporting date are non-adjusting and should be disclosed if material to users of the interim report.
(Qualified) Chartered Accountant – ICAP
Master of Commerce – HEC, Pakistan
Bachelor of Accounting (Honours) – AeU, Malaysia