Financial statements are prepared as at a date, but they are not signed on that date. Weeks or months pass between the reporting date and the date the directors authorise the statements for issue, and things happen in that gap. A customer may collapse, a court may decide a case or a warehouse may burn down.
International Accounting Standard (IAS) 10 Events after the Reporting Period says which of these events change the figures and which are only mentioned in the notes. This topic covers the definition, the two kinds of event with examples, dividends, going concern and the disclosures. The next topic covers related party disclosures.
In the diets reviewed for this page none of the questions read tests the topic directly, but it appears as an adjustment inside the main accounts question, for example a court case settled after the year end or inventory sold at a loss soon after. Read provisions, contingent liabilities and contingent assets first.
In 30 seconds
Events after the reporting period are favourable or unfavourable events between the reporting date and the date the statements are authorised for issue. Adjusting events give evidence of conditions that existed at the reporting date, so the amounts are adjusted.
Non-adjusting events are about conditions that arose after the reporting date, so the amounts are not adjusted. But material ones are disclosed with their nature and an estimate of the financial effect. Dividends declared after the reporting date are not a liability at that date. If management decides after the period to liquidate or cease trading, the statements are not prepared on a going concern basis. The date of authorisation is disclosed.
The period and the definition
Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. The date of authorisation is when the directors (or the body with the authority) approve the statements for issue, which may be before the shareholders approve them.
If the owners can amend the statements after issue, the date is the date of issue of the amended statements.
Adjusting events
An adjusting event provides evidence of conditions that existed at the end of the reporting period. The entity adjusts the amounts recognised, or recognises items not previously recognised. Examples:
- the settlement of a court case after the reporting date that confirms the entity had a present obligation at that date (the provision is adjusted, or one is recognised);
- information that an asset was impaired at the reporting date, for example the bankruptcy of a customer after the period, which confirms that a receivable was impaired, or the sale of inventory after the period at a price that gives evidence of its net realisable value at the reporting date;
- the determination after the period of the cost of assets bought, or the proceeds of assets sold, before the end of the period;
- the determination after the period of a profit-sharing or bonus payment the entity was obliged to make because of events before the date; and
- the discovery of fraud or errors showing that the financial statements are incorrect.
Non-adjusting events
A non-adjusting event is indicative of a condition that arose after the reporting period. The amounts are not adjusted. If the event is material, so that omitting it could influence users’ decisions, the notes disclose its nature and an estimate of its financial effect, or a statement that an estimate cannot be made. Examples:
- a major business combination or the disposal of a major subsidiary after the period;
- the announcement of a plan to discontinue an operation, or a major restructuring that began after the period;
- major purchases or disposals of assets, or the expropriation of major assets by government;
- the destruction of a major plant by a fire after the period;
- a fall in the fair value of investments after the period, because it reflects conditions arising after it;
- abnormally large changes in asset prices or exchange rates after the period, and changes in tax rates enacted after the period;
- entering into significant commitments or contingent liabilities, for example by giving large guarantees; and
- commencing major litigation arising from events after the period.
The test is not how bad the event is but when the condition arose. A customer that goes into liquidation because of a fire that happened after the year end is a non-adjusting event, while a customer that fails because of debts that existed at the year end confirms an impaired receivable.
Dividends and going concern
If dividends to holders of equity instruments are declared after the reporting period, the entity does not recognise them as a liability at the end of the period, because no obligation existed then. They are non-adjusting: the amount is disclosed in the notes, as is the amount per share. Dividends declared before the year end are recognised in the year.
An entity does not prepare its financial statements on a going concern basis if management determines after the reporting period that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative to doing so.
A deterioration in operating results and financial position after the period may indicate that the going concern assumption is no longer appropriate. This requires a fundamental change in the basis of accounting rather than an adjustment to amounts.
Disclosure
- The date when the financial statements were authorised for issue and who gave that authorisation. If the owners can amend the statements after issue, that fact is disclosed.
- If the entity receives information after the period about conditions that existed at the reporting date, it updates the related disclosures in the light of that information.
- For each material category of non-adjusting event: the nature of the event and an estimate of its financial effect, or a statement that an estimate cannot be made.
The ideas in more depth
Why adjusting events change the figures
The statements describe the position at the reporting date. New information that clarifies that position, such as the final outcome of a lawsuit already under way at the year end, shows the best available estimate was off, so the figures are corrected. New information about a different, later condition does not alter the position at the reporting date and is only disclosed.
Why dividends are a special case
A dividend creates a liability when it is declared, not when profits are earned. A dividend proposed after the year end did not oblige the company to pay anyone at the year end, so recognising it would overstate liabilities.
Sources and references
- IAS 10 Events after the Reporting Period: definition, recognition and measurement of adjusting and non-adjusting events, dividends, going concern, and disclosure.
- IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 2 Inventories, for the examples of adjusting events above.
These points are stated as at 5 November 2026.
Worked examples
Example 1: inventory. At the year end inventory is carried at its cost of ₦900,000. After the year end it is sold for net proceeds, after selling costs, of ₦640,000. Required: the treatment.
- Adjusting. The sale price is evidence of the net realisable value at the reporting date, which was below cost.
- Adjustment.
Write the inventory down by ₦900,000 − ₦640,000 = ₦260,000: Dr Cost of sales, Cr Inventory.
Example 2: a customer fails. A customer owes ₦2,400,000 at the year end. In February it is put into liquidation because of debts that existed at the year end, and only 10% is expected to be recovered. Required: the treatment.
- Adjusting. The liquidation confirms the receivable was impaired at the year end.
- Adjustment.
Expected recovery ₦2,400,000 × 10% = ₦240,000, so write off ₦2,160,000.
Example 3: a lawsuit and a fire. At the year end a provision of ₦1,000,000 is held for a lawsuit. After the year end the case is settled for ₦1,400,000. A fire after the year end also destroys a warehouse. Required: the treatment.
- Lawsuit. The settlement confirms the obligation existed at the year end. Adjusting: increase the provision by ₦400,000 (Dr Profit or loss, Cr Provision).
- Fire. The condition arose after the reporting date. Non-adjusting: no change to the amounts, and disclosure of the nature of the event and an estimate of the financial effect if material.
How to answer in the exam
- Define the period. From the reporting date to the date of authorisation for issue.
- Classify by when the condition arose. Existed at the reporting date: adjust. Arose afterwards: disclose.
- Give the entry. For an adjusting event, state the debit and credit and the amount.
- Dividends. Declared after the reporting date means no liability, and disclosure only.
Common mistakes in the exam
- Adjusting for a fire or a fall in market value that happened after the year end.
- Not adjusting for a settled lawsuit or an insolvent customer whose problems existed at the year end.
- Recognising a dividend declared after the year end as a liability.
- Forgetting to disclose a material non-adjusting event.
- Treating a later decision to liquidate as an adjustment instead of a change in the basis of preparation.
Quick revision
- Period: reporting date to authorisation for issue.
- Adjusting: evidence of conditions at the reporting date; adjust amounts.
- Non-adjusting: conditions arising after; disclose nature and financial effect if material.
- Dividends declared after the period: no liability; disclose.
- Going concern: decision to liquidate after the period means a different basis.
- Disclose the authorisation date.
Practice questions
These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.
Recall check: multiple choice
Question 1. Events after the reporting period are events that occur between:
- The year end and the annual general meeting
- The reporting date and the date the statements are authorised for issue
- The start of the year and the end of the year
- The reporting date and the date of the audit report only
Show the answer
B. The end date is when the statements are authorised for issue.
Question 2. Which of the following is an adjusting event?
- A fire after the year end
- A fall in the market value of investments after the year end
- A dividend declared after the year end
- The settlement of a court case that confirms an obligation existing at the year end
Show the answer
D. It is evidence of a condition at the reporting date.
Question 3. A material non-adjusting event is:
- Disclosed in the notes, without adjusting the amounts
- Always adjusted
- Ignored
- Recognised as a provision
Show the answer
A. The nature and an estimate of the financial effect are disclosed.
Question 4. A dividend on equity shares declared after the reporting date is:
- Recognised as a liability at the reporting date
- Adjusted against retained earnings
- Not recognised as a liability at the reporting date, and disclosed
- Ignored completely
Show the answer
C. No obligation existed at the reporting date.
Question 5. After the reporting period management decides to liquidate the entity. The statements:
- Are adjusted for the liquidation costs
- Are not prepared on a going concern basis
- Disclose the decision only
- Are unaffected
Show the answer
B. A different basis of accounting is required.
Question 6. The entity must disclose:
- The names of all employees
- The auditor’s fee only
- The profit forecast
- The date the statements were authorised for issue and who authorised them
Show the answer
D. This is a required disclosure.
Question 7. The bankruptcy of a customer after the year end, caused by debts that existed at the year end, is:
- An adjusting event
- A non-adjusting event
- Not relevant
- A going concern matter only
Show the answer
A. It confirms that the receivable was impaired at the year end.
Question 8. A major business combination after the year end is:
- Adjusting
- Ignored
- Non-adjusting, with disclosure of its nature and the estimated financial effect
- Recognised with goodwill at the year end
Show the answer
C. The condition arose after the reporting date.
Question 9. The discovery after the year end of an error that shows the statements are incorrect is:
- Non-adjusting
- Adjusting
- Ignored
- Disclosed only
Show the answer
B. The error relates to the reporting date, so the amounts are corrected.
Question 10. A fall in the market value of investments after the year end is:
- Adjusting
- Ignored
- Non-adjusting, because it reflects conditions arising after the reporting date
- An error
Show the answer
C. The value at the reporting date was correct.
Section B style: written questions
Question 11 (10 marks). (a) Define events after the reporting period. (2 marks) (b) Distinguish adjusting from non-adjusting events, giving TWO examples of each. (5 marks) (c) State the disclosures required. (3 marks)
Question 12 (15 marks). State whether each event is adjusting or non-adjusting, and its treatment. (i) A customer is liquidated after the year end because of trading losses that existed at the year end. (ii) A fire destroys a warehouse after the year end. (iii) Directors declare a dividend after the year end. (iv) Inventory is sold after the year end below its cost.
(v) A court case is settled after the year end for more than the provision. (vi) The company acquires a subsidiary after the year end. (15 marks, 2½ marks each)
A further written question
Question 13 (20 marks). At 31 December Kogi Foods has inventory at cost ₦1,500,000, a receivable of ₦3,200,000 from a customer, and a provision of ₦2,000,000 for a lawsuit.
After the year end and before the statements are authorised:
- (i) the inventory is sold for net proceeds of ₦1,100,000
- (ii) the customer is liquidated because of debts existing at the year end and 10% is expected to be recovered
- (iii) the lawsuit is settled for ₦2,600,000
- (iv) the directors declare a dividend of ₦5,000,000
- (v) a fire destroys a warehouse, the loss being ₦8,000,000 with insurance of ₦6,000,000
- (vi) management decides to cease trading
(a) Calculate the adjustment for (i), (ii) and (iii). (12 marks)
(b) State the treatment of (iv) and (v). (4 marks)
(c) State the effect of (vi) on the basis of preparation. (2 marks)
(d) State the disclosures required. (2 marks)
Model answers
Show the model answer to Question 11
(a) Events after the reporting period are events, favourable and unfavourable, (1) that occur between the end of the reporting period and the date the financial statements are authorised for issue (1).
(b) An adjusting event provides evidence of conditions that existed at the reporting date, so the amounts are adjusted (1.5). Examples (1 mark each, any two):
- settlement of a court case confirming an obligation at the year end
- bankruptcy of a customer confirming an impaired receivable
- sale of inventory showing net realisable value
- discovery of fraud or errors
A non-adjusting event is about conditions that arose after the reporting date, so the amounts are not adjusted (1.5). Examples (any two, 0.5 mark each in addition): fire, fall in market value of investments, business combination, announcing a restructuring.
(c) The date the statements were authorised for issue and who authorised it (1); the nature of each material non-adjusting event (1) and an estimate of its financial effect or a statement that it cannot be made (1).
Show the model answer to Question 12
(i) Adjusting: confirms the receivable was impaired at the year end; write off or provide against it (2.5). (ii) Non-adjusting: the fire arose after the year end; disclose nature and estimated effect if material (2.5). (iii) Non-adjusting: dividends declared after the period are not a liability at the year end; disclose (2.5). (iv) Adjusting: the sale price is evidence of net realisable value at the year end; write inventory down (2.5).
(v) Adjusting: the settlement confirms the obligation at the year end; increase the provision (2.5). (vi) Non-adjusting: an acquisition after the year end; disclose its nature and estimated financial effect (2.5).
Show the model answer to Question 13
(a)
- (i) Adjusting: the sale price evidences net realisable value at the year end (1).
- Write down ₦1,500,000 − ₦1,100,000 = ₦400,000 (Dr Cost of sales, Cr Inventory) (3).
- (ii) Adjusting: the liquidation confirms the receivable was impaired (1).
- Expected recovery 10% × ₦3,200,000 = ₦320,000, so write off ₦3,200,000 − ₦320,000 = ₦2,880,000 (3).
- (iii) Adjusting: the settlement confirms the obligation at the year end (1).
- Increase the provision by ₦2,600,000 − ₦2,000,000 = ₦600,000 (Dr Profit or loss, Cr Provision) (3).
(b) (iv) Non-adjusting: a dividend declared after the period is not a liability at the year end (1); disclose the dividend and the amount per share (1). (v) Non-adjusting: the fire arose after the reporting date (1); disclose the nature and the estimated financial effect, ₦8,000,000 less ₦6,000,000 insured, a net ₦2,000,000 (1).
(c) The statements are not prepared on a going concern basis (1), which is a fundamental change in the basis of accounting, not an adjustment to individual amounts (1).
(d) The date the statements were authorised for issue and who authorised them (1), and the nature and estimated financial effect of each material non-adjusting event (1).
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