Statements and analysis
IAS 10 · Events after the reporting period
Existed at the reporting date: adjust. Arose later: disclose.
Draft: not yet reviewed by a teacher
Why it exists
Statements for a year ending on 31 December are authorised weeks later, and news arrives in between. Some news shows the 31 December figures were wrong; some describes new events. The standard separates them so that the figures show the position at the reporting date and users still learn what matters.
Key rules
- The period runs from the end of the reporting period to the date the statements are authorised for issue.
- An adjusting event gives evidence of conditions that existed at the reporting date: change the figures.
- A non-adjusting event reflects conditions that arose after the reporting date: do not change the figures; disclose material ones (the nature and an estimate of the effect).
- Adjusting examples: the insolvency of a customer who owed money at the reporting date; inventory sold below cost; a court ruling on a case that began before the reporting date; the discovery of an error or fraud.
- Non-adjusting examples: a fire or flood after the reporting date, a major business acquisition, a share issue, a fall in share prices.
- Dividends declared after the reporting date are not a liability at that date: disclose only. If after the reporting date management decides to liquidate the entity or stop trading (or has no realistic alternative), the statements are not prepared on a going concern basis.
Examples
The year ends on 31.12.2026 and the statements are authorised on 20.03.2027. Inventory is at its cost of 40,000.
- 15 January: a customer owing 8,000 is declared insolvent → adjusting: write off 8,000
- 10 February: a fire destroys goods worth 25,000 → non-adjusting: disclose
- In February the inventory is sold for 31,000, with selling costs of 1,000 → NRV 30,000 < 40,000 → adjusting: write down by 10,000
How it works
The key question: did the condition exist at the reporting date? The news may arrive later, but if it only confirms what was already true (the customer's debt was already bad on 31 December), it is an adjusting event.
A non-adjusting event changes the world after the reporting date; the year's figures stay as they are, but users must learn about it from the notes.
Traps
Taught in the course
- The year is closed, but the news keeps comingFA 8 · Provisions, contingencies and events after the reporting period
- Probable, possible, remoteFA 8 · Provisions, contingencies and events after the reporting period
- Rauf's six adjustmentsFA 8 · Provisions, contingencies and events after the reporting period
- Exam-format practiceFA 8 · Provisions, contingencies and events after the reporting period
- The chapter bossFA 8 · Provisions, contingencies and events after the reporting period
- When the obligation already existsFR 8 · Provisions and events after the reporting period
- Abşeron Neft Servis's five provisionsFR 8 · Provisions and events after the reporting period
- A generous provisionFR 8 · Provisions and events after the reporting period
- Exam-format practiceFR 8 · Provisions and events after the reporting period
- Chapter boss fightFR 8 · Provisions and events after the reporting period