IAS 10 Events After the Reporting Period: A Practical Guide

What Is IAS 10?

IAS 10 Events After the Reporting Period governs how a company accounts for events that occur between its balance sheet date and the date on which the financial statements are authorised for issue. Some events require adjustment to the financial statements; others require only disclosure.

Adjusting Events

Adjusting events are those that provide evidence of conditions that existed at the balance sheet date. The financial statements are adjusted to reflect them. Examples: settlement of a court case after year end that was pending at year end (confirming an obligation that existed at year end); discovery of a fraud or error showing the financial statements were incorrect; a customer going bankrupt after year end who was already in financial difficulty at year end (adjusting the bad debt provision); inventory sold below cost after year end (confirming NRV was below cost at year end).

Non-Adjusting Events

Non-adjusting events relate to conditions that arose after the balance sheet date. These do not lead to adjustments but require disclosure if material. Examples: a major acquisition completed after year end; a fire destroying a major factory after year end; announcing a major restructuring after year end; a significant fall in investment values after year end. Material non-adjusting events must be disclosed — the nature of the event and an estimate of its financial effect where possible.

Dividends

Dividends declared after the balance sheet date are a non-adjusting event — they should not be recognised as a liability at year end. This is because no obligation existed at the balance sheet date. Disclosure of such dividends is required in the notes.

Going Concern

If it becomes apparent after the balance sheet date that the entity is not a going concern, this is an adjusting event — the financial statements must be prepared on a basis other than going concern. IAS 10 is examined in ACCA FR and is practically relevant for any accountant involved in year-end financial statement preparation.