Overview of IAS 10 – Events After the Reporting Period

IAS 10 governs how an entity accounts for and discloses events that occur between the end of the reporting period and the date the financial statements are authorised for issue (IAS 10.3). The standard draws a critical distinction between adjusting and non-adjusting events, which determines whether the financial statements themselves are changed or merely supplemented with disclosure.

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Adjusting Events (IAS 10.8–10.9)

Adjusting events are those that provide evidence of conditions that existed at the end of the reporting period. Because the underlying condition existed at the balance sheet date, the financial statements must be updated to reflect the new information.

Common examples include:

• Settlement of a court case after the reporting date that confirms the entity had a present obligation at year-end (IAS 10.9a)
• Receipt of information after the reporting date indicating that an asset was impaired at year-end (e.g., a customer declaring bankruptcy shortly after period-end, confirming a receivable was irrecoverable – IAS 10.9b)
• Discovery of fraud or errors showing the financial statements were incorrect (IAS 10.9e)
• The determination of the cost of assets purchased, or the proceeds from assets sold, before period-end (IAS 10.9c)
• Post-period finalisation of profit-sharing or bonus payments that existed as obligations at year-end (IAS 10.9d)

Accounting treatment: The entity adjusts the amounts recognised in the financial statements to reflect these events.

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Non-Adjusting Events (IAS 10.10–10.11)

Non-adjusting events relate to conditions that arose after the reporting period. Because no condition existed at the balance sheet date, adjusting the financial statements would misrepresent the position at period-end. Instead, disclosure is required if the event is material.

Common examples include:

• A major business combination completed after the reporting date (IAS 10.22a)
• Announcing a plan to discontinue an operation (IAS 10.22b)
• A significant decline in the fair value of investments between the reporting date and authorisation date (IAS 10.11)
• Major litigation commenced after the reporting date
• Significant foreign exchange rate movements post period-end
• Destruction of a major plant by fire after the reporting date

Accounting treatment: No adjustment to the financial statements. For material non-adjusting events, IAS 10.21 requires disclosure of: (i) the nature of the event, and (ii) an estimate of its financial effect (or a statement that no reliable estimate can be made).

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Special Case – Dividends (IAS 10.12–10.13)

Dividends declared after the reporting period but before the financial statements are authorised for issue are explicitly non-adjusting under IAS 10.12. They must not be recognised as a liability at the reporting date. However, disclosure of such dividends may be required under IAS 1.

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Going Concern Consideration (IAS 10.14–10.16)

If events after the reporting period indicate that the going concern assumption is no longer appropriate, the entity must make fundamental changes to the basis of preparation — a far-reaching consequence that overrides normal adjusting/non-adjusting classifications.

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Key Date to Remember

The cut-off point under IAS 10 is the date the financial statements are authorised for issue (IAS 10.4–10.6), not the AGM approval date. This date should be disclosed (IAS 10.17).