IAS 10 Events After the Reporting Period: A Practical Guide

IAS 10 Events After the Reporting Period is the accounting standard that governs how a business deals with events that happen after its year-end but before the financial statements are authorised for issue. The key question it answers is which of those events should change the figures, and which should simply be disclosed in the notes. This practical guide explains what IAS 10 covers, the crucial distinction between adjusting and non-adjusting events, the treatment of dividends and going concern, and why it matters — in clear, plain language. It's a core financial-reporting topic, frequently tested, and relevant to ACCA study.

What is IAS 10?

IAS 10 deals with events after the reporting period — those occurring between the end of the reporting period (the year-end) and the date the financial statements are authorised for issue. During this window, things can happen that provide new information about the business's position. IAS 10 sets out which of these events require the financial statements to be adjusted, and which simply require disclosure — a distinction that is at the heart of the standard, and one that turns on a single question: did the underlying condition exist at the year-end?

Adjusting events

An adjusting event is one that provides evidence of conditions that already existed at the end of the reporting period. Because the condition was present at the year-end, the financial statements must be adjusted to reflect it. Examples include:

• The settlement of a court case after the year-end that confirms the entity had a present obligation at the year-end.
• Evidence that an asset was impaired at the year-end — for example, the bankruptcy of a customer shortly after year-end confirms a receivable was not collectable.
• The discovery of fraud or errors showing the financial statements were incorrect.
• The sale of inventory after year-end giving evidence of its net realisable value at the year-end.

Non-adjusting events

A non-adjusting event is one that is indicative of conditions that arose after the reporting period. The condition did not exist at the year-end, so the financial statements are not adjusted. However, if the event is material, its nature and an estimate of its financial effect must be disclosed, so users are not misled. Examples include:

• A major business combination after the year-end.
• A significant fall in the market value of investments after the year-end (reflecting conditions that arose afterwards).
• A major fire or natural disaster destroying assets after the year-end.
• Announcing a plan to discontinue an operation.

Dividends and going concern

Two specific situations are worth highlighting. Dividends declared after the reporting period are not recognised as a liability at the year-end, because no obligation existed at that date — they are instead disclosed. Going concern is a critical exception to the adjusting/non-adjusting framework: if management determines after the reporting period that it intends to liquidate the entity or cease trading, or that it has no realistic alternative, the financial statements must not be prepared on a going concern basis — a fundamental change, regardless of when the underlying deterioration occurred.

Why IAS 10 matters

IAS 10 matters because the period between year-end and authorisation can reveal important information, and treating it correctly is essential to a true and fair view of the position. Adjusting for events that confirm year-end conditions ensures the figures are accurate, while disclosing significant later events ensures users aren't misled about what has happened since. Getting the distinction right — did the condition exist at the year-end or not? — is a key skill, and a regularly examined area of financial reporting that often appears in exam scenarios.

Frequently asked questions

What is IAS 10?

The international standard on Events After the Reporting Period, governing how to treat events occurring between the year-end and the date the financial statements are authorised for issue.

What is an adjusting event?

An event providing evidence of conditions that already existed at the year-end — the financial statements must be adjusted to reflect it (for example, a customer's bankruptcy confirming a receivable was uncollectable).

What is a non-adjusting event?

An event indicative of conditions that arose after the year-end — the statements are not adjusted, but if material, the event's nature and estimated financial effect are disclosed.

How are dividends declared after year-end treated?

They are not recognised as a liability at the year-end (no obligation existed then), but are disclosed. Going concern, however, is an override: if the entity is no longer a going concern, the basis of preparation changes.

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