What are Events After the Reporting Period?
Events after the reporting period are those that occur between the balance sheet date and the date the financial statements are authorized for issue. IAS 10 splits them into adjusting events, which require changes to the reported numbers, and non-adjusting events, which only need disclosure.
Events after the reporting period are favorable or unfavorable events between the reporting date and the date financial statements are authorized for issue; adjusting events provide evidence of conditions that existed at year-end, while non-adjusting events indicate conditions that arose afterward.
- •Provide evidence of conditions existing at year-end
- •Financial statements MUST be adjusted
- •Example: customer bankruptcy confirming a bad debt
- •Example: court case settled after year-end confirming a liability
- •Example: fraud or error discovered after year-end
- •Indicate conditions arising after year-end
- •Financial statements are NOT adjusted, only disclosed
- •Example: a major fire destroying a factory after year-end
- •Example: a business combination announced after year-end
- •Example: a sharp decline in market value of investments after year-end
Step-by-step worked examples
A company's year-end is December 31. On January 15, a customer who owed $50,000 at December 31 goes bankrupt, confirming the debt is uncollectible. Statements are authorized for issue on February 1. How is this treated?
The customer's financial difficulty existed at December 31 (the debt was already outstanding). The bankruptcy on January 15 merely confirms that condition — this is an adjusting event. The company must write down the receivable/increase the allowance for doubtful accounts in the December 31 financial statements.
On January 20, a fire completely destroys one of the company's warehouses, which was fine at December 31. Statements are authorized February 1. How is this treated?
The fire is a new event; the warehouse was intact at the reporting date. This condition did not exist at year-end — it is a non-adjusting event. The company does not adjust the financial statements but must disclose the nature and estimated financial effect of the fire.
After year-end but before the statements are authorized, the board declares a dividend based on the year's profits. Should the dividend be recorded as a liability at year-end?
A dividend declared after the reporting period does not represent an obligation that existed at year-end. This is a non-adjusting event under IAS 10. The dividend is disclosed in the notes but not recognized as a liability at year-end.
Flashcards
Quick quiz
Q1.A lawsuit that existed at year-end is settled after year-end, confirming the exact liability amount. This is:
Q2.A factory fire occurring after year-end, with no prior indication of risk, is:
Q3.Which standard governs events after the reporting period?
Q4.Non-adjusting events are:
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Common mistakes
Adjusting the financial statements for every post-year-end event. — Correct: Only events confirming conditions that existed at year-end (adjusting events) change the figures; new conditions are only disclosed.
Ignoring non-adjusting events entirely because they're not adjusted. — Correct: Material non-adjusting events must still be disclosed, including their nature and estimated financial effect.
Treating a dividend declared after year-end as a liability at year-end. — Correct: Dividends declared after the reporting date are a non-adjusting event and are disclosed, not recognized as a liability.
Confusing the reporting period end with the authorization date. — Correct: The relevant window runs until the date the statements are AUTHORIZED FOR ISSUE, not just the balance sheet date.
FAQ
What are events after the reporting period?
Events, favorable or unfavorable, occurring between the reporting date and the date financial statements are authorized for issue, governed by IAS 10.
What is the events after the reporting period formula?
There's no formula — classification depends on whether the event confirms a condition that existed at year-end (adjusting) or arose afterward (non-adjusting).
What are examples of adjusting vs. non-adjusting events?
Adjusting: a customer bankruptcy confirming a bad debt that existed at year-end. Non-adjusting: a fire or acquisition that occurs after year-end.
How to determine if an event after the reporting period requires adjustment?
Ask whether the event provides evidence of a condition that existed at the balance sheet date. If yes, adjust; if the condition only arose afterward, disclose only.