IAS 10: Events after the reporting period
Which events after the year end change the figures, which only need a note, and the going concern exception.
ACCA exams this helps with: FR Financial Reporting AA Audit and Assurance See the ACCA map
New to this topic?
What it is: Accounts are finished weeks or months after the year end. IAS 10 says what to do about things that happen in that gap.
The key idea: if the event gives more information about something that already existed at the year end, change the figures (adjusting). If it is new, just describe it in the notes if it’s material (non-adjusting).
Example. A customer who owed money at 31 December goes bust in January. The debt was already bad at the year end, so write it off in the accounts. A fire in February is a new event, so it’s only disclosed.
Key words
- Reporting period end
- The date the accounts are drawn up to, such as 31 December.Example: A company with a 31 December year end.
- Date of authorisation
- The date the directors approve the accounts for issue. Events after this are ignored.Example: The board signs the accounts on 15 March.
- Adjusting event
- An event after the year end that gives evidence of conditions that existed at the year end. The figures are changed.Example: A court case open at the year end is settled for more than the provision.
- Non-adjusting event
- An event after the year end about conditions that arose after it. Disclosed in the notes if material, not adjusted.Example: A warehouse is destroyed by fire in February.
Learn
IAS 10 covers events between the end of the reporting period and the date the accounts are authorised for issue.
| Type | Test | Treatment | Examples |
|---|---|---|---|
| Adjusting | Gives evidence about conditions that existed at the year end | Change the figures | Customer insolvency relating to a year-end debt; inventory sold below cost after the year end; settlement of a court case open at the year end; discovery of fraud or errors |
| Non-adjusting | About conditions that arose after the year end | Disclose the nature and financial effect, if material | Fire or flood; a major acquisition; a fall in the market value of investments; announcing a restructuring; share issues |
Dividends
Dividends declared after the year end are not a liability at the year end, because there was no obligation then. They are disclosed in the notes.
Going concern: the big exception
If, after the year end, management decides to close the business, or has no realistic alternative, the accounts must not be prepared on a going concern basis, even though the problem arose after the year end.
More examples from the workshop
| Event after the year end | Type |
|---|---|
| Cost of an asset bought, or proceeds of an asset sold, before the year end is finalised | Adjusting |
| Bonus or profit-share amount settled, where the obligation existed at the year end | Adjusting |
| Customer goes bankrupt (debt existed at the year end) | Adjusting |
| Dividends declared | Non-adjusting |
| Major losses from a natural disaster after the year end | Non-adjusting |
| A lawsuit started over events that happened after the year end | Non-adjusting |
| Plan to close or cut back a major segment | Non-adjusting |
| Buying a subsidiary or associate | Non-adjusting |
Non-adjusting events are disclosed if material.
Watch it explained
Press play to watch the animation, or step through it at your own pace with the arrows.
Videos from YouTube tutors
These videos are made by independent tutors on YouTube, not by Trial Balance. Some use US terms or older exam names (for example F7 for FR), but the principles are the same.
Worked example
A company’s year end is 31 December 20X5. The accounts are approved on 15 March 20X6. Three things happen in between:
| Event | Type | Effect on the 20X5 accounts |
|---|---|---|
| 20 Jan: a customer owing £40,000 goes into liquidation. The liquidator expects to pay 25p in the £ | Adjusting | Write down the receivable by £40,000 × 75% = £30,000 |
| 8 Feb: a fire destroys inventory costing £90,000 | Non-adjusting | Disclose in the notes: what happened and the £90,000 loss |
| 1 Mar: the directors declare a dividend of £50,000 | Non-adjusting | Not a liability. Disclose it in the notes |
| Account | Dr £ | Cr £ |
|---|---|---|
| Irrecoverable debts expense | 30,000 | |
| Trade receivables | 30,000 | |
| (Write-down of debt from customer in liquidation at the year end) | ||
Practice questions
Type or choose your answers, then press Check answer. Questions with a New numbers button can be repeated with different figures.