Objective
IAS 10 prescribes when and how an entity should adjust its financial statements for events that occur between the reporting date and the date when the financial statements are authorized for issue.
1. Definition
Events after the reporting period are those that occur between:
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The end of the reporting period (e.g., 31 December 2025), and
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The date when the financial statements are authorized for issue (e.g., 20 March 2026).
These events may be:
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Adjusting events
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Non-adjusting events
2. Adjusting Events
👉 Definition:
Events that provide evidence of conditions that existed at the end of the reporting period.
✅ Effect:
→ Financial statements must be adjusted.
Examples of Adjusting Events
| Example | Explanation |
|---|---|
| 1. Customer bankruptcy | A customer who owed $50,000 at 31 Dec 2025 is declared bankrupt on 10 Jan 2026. → Evidence existed that the receivable was impaired at year-end. Adjust the receivable balance. |
| 2. Settlement of a court case | A lawsuit existed at 31 Dec 2025, and in Feb 2026 it’s settled for $80,000 (expected was $75,000). → Adjust provision to $80,000. |
| 3. Discovery of fraud or error | Fraud discovered in Jan 2026 that existed in 2025 books. → Adjust 2025 financials to correct the error. |
| 4. Inventory valuation | Inventory sold after year-end at below cost provides evidence that net realizable value was lower at year-end. → Adjust inventory down to NRV. |
3. Non-Adjusting Events
👉 Definition:
Events that indicate conditions that arose after the reporting period.
🚫 Effect:
→ Do not adjust financial statements.
✅ But disclose if material.
Examples of Non-Adjusting Events
| Example | Explanation |
|---|---|
| 1. Fire or flood after year-end | Warehouse destroyed in Jan 2026 (after year-end). Condition arose after 31 Dec 2025. → Disclose only. |
| 2. Issue of shares or dividends declared after year-end | Dividends declared on 15 Jan 2026 (after 31 Dec 2025). → Not recognized as liability at 31 Dec 2025. → Disclose in notes. |
| 3. Major business combination | Company acquired another business in Feb 2026. → Disclose the event and possible impact. |
| 4. Decline in market value of investments after year-end | Market price fell in Jan 2026 due to new events. → No adjustment, only disclose if significant. |
4. Dividends
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Dividends declared after the reporting period should not be recognized as a liability at the end of the reporting period.
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They should be disclosed in the notes.
Example:
Board declares dividend of $100,000 on 15 January 2026 for 2025 profits.
→ Not a liability at 31 Dec 2025.
→ Disclose in notes:
“After the reporting period, the company declared a dividend of $100,000 to shareholders.”
5. Going Concern Consideration
If events after the reporting period indicate that the going concern assumption is no longer appropriate, the financial statements must not be prepared on a going concern basis.
Example:
After year-end, the company’s major customer cancels contracts and the bank withdraws funding → company cannot continue operations.
→ Adjust basis of preparation (e.g., liquidation basis).
6. Date of Authorization for Issue
Entities must disclose the date when financial statements were authorized for issue and who gave that authorization.
If the entity’s owners can change the financial statements after issuance, disclose that fact too.
Example:
Financial statements for year ended 31 Dec 2025 were authorized for issue by the Board on 20 March 2026.
→ Disclose this date in the notes.
7. Disclosure Requirements
If non-adjusting events are material, disclose:
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Nature of the event
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An estimate of its financial effect, or a statement that such an estimate cannot be made.
Example (Disclosure Format):
Subsequent Event – Fire Incident
On 10 February 2026, a fire destroyed one of the company’s warehouses. The carrying amount of inventory stored was approximately $2 million. The company is in the process of filing insurance claims.
8. Summary Table
| Type of Event | Definition | Accounting Treatment | Example |
|---|---|---|---|
| Adjusting Event | Provides evidence of conditions existing at year-end | Adjust FS | Customer bankruptcy, court case settlement |
| Non-Adjusting Event | Indicates conditions arising after year-end | Disclose only | Fire after year-end, dividends declared |
| Dividends | Declared after year-end | Disclose, not liability | Dividend declared in Jan 2026 |
| Going Concern | If no longer appropriate | Change basis | Loss of major customer after year-end |
✅ In Summary
IAS 10 ensures that:
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Financial statements reflect all relevant information about conditions existing at the reporting date, and
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Significant events after year-end are disclosed so users are informed about their possible impact.