IAS 10 Events After the Reporting Period — Core Rule

IAS 10 Events After the Reporting Period governs how entities account for and disclose events occurring between the end of the reporting period and the date the financial statements are authorised for issue. As stated in IAS 10.2, the standard applies to the accounting for, and disclosure of, all such events — favourable and unfavourable.

The standard draws a critical distinction between two types of events (IAS 10.3):

• Adjusting events — provide evidence of conditions that existed at the end of the reporting period; the financial statements must be adjusted to reflect them
• Non-adjusting events — arise from conditions that emerged after the reporting period; no adjustment is made, but material events require disclosure

The cut-off point is the authorisation date — when the financial statements are formally approved for issue. IAS 10.7 confirms that all events up to that date fall within scope, even if they occur after the public announcement of profit or other selected financial information.

How IAS 10 Events After the Reporting Period Works

Adjusting events

IAS 10.8 requires an entity to adjust the amounts recognised in its financial statements to reflect adjusting events. The key test is whether the event provides new information about a condition that already existed at the reporting date. Examples under IAS 10.9 include:

• Settlement after the reporting period of a court case that confirms a present obligation existed at year-end
• Receipt of information confirming that a customer was insolvent at the reporting date, requiring impairment of a receivable
• Discovery of fraud or errors showing the financial statements were misstated

Non-adjusting events

IAS 10.10 is equally clear: an entity shall not adjust its financial statements for non-adjusting events. These reflect conditions that arose only after the reporting date. A classic example given in IAS 10.11 is a decline in the fair value of investments between the reporting date and the authorisation date — this reflects post-period circumstances, not conditions at year-end, so no adjustment is made. However, disclosure may still be required if the event is material.

Dividends

A specific rule applies to dividends: IAS 10.12 states that if an entity declares dividends to holders of equity instruments after the reporting period, those dividends shall not be recognised as a liability at the end of the reporting period. No obligation exists at the reporting date, so there is nothing to accrue — the declaration is disclosed in the notes instead.

Going concern

If management determines after the reporting period that it intends to liquidate the entity or cease trading, IAS 10.14 prohibits preparation of the financial statements on a going concern basis. Additionally, IAS 10.15 notes that a deterioration in operating results and financial position after the reporting period may indicate a need to reassess whether the going concern assumption remains appropriate — the effect of abandoning that assumption is so pervasive that it requires a fundamental change in the basis of accounting.

IAS 10 Events After the Reporting Period — Common Pitfalls

• Confusing the authorisation date with the AGM or filing date. Shareholders approving the financial statements after issue does not extend the cut-off window — the authorisation date is when management or the board approves the statements for issue.
• Adjusting for post-period price changes. A drop in market value after year-end is a non-adjusting event (IAS 10.11) — it does not restate the year-end carrying amount.
• Accruing proposed dividends. Dividends declared after the reporting period are not liabilities at year-end (IAS 10.12). Accruing them is a common error.
• Omitting disclosures for material non-adjusting events. Even when no adjustment is required, IAS 10.21 requires disclosure of each material category of non-adjusting event, including the nature of the event and an estimate of its financial effect (or a statement that such an estimate cannot be made).
• Forgetting to update disclosures. IAS 10.19 requires an entity to update disclosures about conditions that existed at the reporting date when new information is received after the period, even if no remeasurement is needed.

IAS 10 Events After the Reporting Period — Key Paragraphs

• IAS 10.3 — Defines events after the reporting period and establishes the two categories: adjusting and non-adjusting
• IAS 10.8 — Requires adjustment of financial statements to reflect adjusting events after the reporting period
• IAS 10.10 — Prohibits adjustment of financial statements for non-adjusting events
• IAS 10.12 — Dividends declared after the reporting period are not recognised as a liability at the reporting date
• IAS 10.14 — Prohibits use of the going concern basis if management determines post-period that liquidation or cessation of trading is intended
• IAS 10.21 — Requires disclosure of material non-adjusting events, including nature and estimated financial effect