Study guide
6.3 Events After the Reporting Period (IAS 10)
ACCA Applied Knowledge — Financial Accounting FA
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1 Chapter 1: Context & Qualitative Characteristics of Financial Reporting
1.1 Scope, Purpose & Governance of Financial Reporting 1.2 Users, Stakeholders & Types of Business Entity 1.3 The IASB Conceptual Framework & Qualitative Characteristics 1.4 Accounting Concepts, Assumptions & Principles
2 Chapter 2: Double-Entry Bookkeeping & Accounting Systems
2.1 The Accounting Equation & Double-Entry Mechanics 2.2 Books of Prime Entry & Source Documents 2.3 Ledger Accounts & Sales / Purchase Tax (VAT) 2.4 Computerized Accounting Systems & Internal Controls
3 Chapter 3: Recording Tangible & Intangible Non-Current Assets
3.1 Capital vs Revenue Expenditure & IAS 16 Acquisition 3.2 Depreciation Methods, Accounting & Changes in Estimate 3.3 Revaluation of Non-Current Assets & Disposals 3.4 Intangible Non-Current Assets & Research & Development (IAS 38)
4 Chapter 4: Accounting for Specific Transactions
4.1 Inventory Valuation, Cost Formulas & Net Realisable Value (IAS 2) 4.2 Irrecoverable Debts & Allowance for Receivables 4.3 Accruals, Prepayments & Payables 4.4 Provisions, Contingent Liabilities & Contingent Assets (IAS 37)
5 Chapter 5: Capital Structure, Trial Balance, Control Accounts & Bank Reconciliations
5.1 Capital Structure, Share Capital, Reserves & Dividends 5.2 Extracting the Trial Balance & Errors Not Affecting Trial Balance 5.3 Control Accounts, Discrepancies & Control Account Reconciliations 5.4 Bank Reconciliations & Correction of Errors via Suspense Account
6 Chapter 6: Preparing Basic Financial Statements
6.1 Statement of Financial Position (IFRS 18) Structure & Preparation 6.2 Statement of Profit or Loss and Other Comprehensive Income (IFRS 18) 6.3 Events After the Reporting Period (IAS 10) 6.4 Incomplete Records Techniques & Single Entry Conversion
7 Chapter 7: Statement of Cash Flows
7.1 Objective, Benefits & Structure of IAS 7 Cash Flows 7.2 Operating Activities: Direct vs Indirect Method Calculations 7.3 Cash Flows from Investing & Financing Activities
8 Chapter 8: Group Accounts
8.1 Group Accounting Concepts: Subsidiaries, Associates & IFRS 10 / IAS 28 8.2 Consolidated Statement of Financial Position: Goodwill & NCI Calculations 8.3 Consolidated Statement of Financial Position: Intra-Group Balances & Unrealised Profits 8.4 Consolidated Statement of Profit or Loss & Associates Equity Accounting
9 Chapter 9: Interpretation of Financial Statements
9.1 Profitability, Return & Margin Ratios 9.2 Liquidity, Working Capital & Working Capital Cycle Ratios 9.3 Solvency, Gearing & Debt Risk Ratios 9.4 Investor Ratios & Limitations of Financial Ratio Analysis
6.3 Events After the Reporting Period (IAS 10)
Key Takeaways Explain This Topic AI
IAS 10 deals with events occurring between the reporting period end date and the date the financial statements are authorized for issue.
Adjusting events provide evidence of conditions that existed at the reporting date, requiring changes to the financial statements.
Non-adjusting events indicate conditions that arose after the reporting date and do not result in changes to the figures.
Material non-adjusting events must be disclosed in the notes, detailing the nature of the event and its estimated financial effect.
If an event after the reporting period indicates the entity is no longer a going concern, the financial statements must be restated on a break-up basis, overriding the non-adjusting rule.
Last updated: July 2026
6.3 Events After the Reporting Period (IAS 10)
Financial statements are prepared as at a specific date (the reporting date or year-end). However, there is always a delay between this date and the date when the financial statements are finalized, audited, and officially 'authorized for issue' by the directors.
IAS 10 Events After the Reporting Period provides guidance on how to handle events—both favorable and unfavorable—that occur during this twilight period.
The Critical Timeline
To apply IAS 10, you must understand three key dates:
The Reporting Date: The end of the financial year (e.g., 31 December 20X5).
The Event Date: The date the event in question occurs (e.g., 15 February 20X6).
The Authorization Date: The date the directors approve the financial statements for issue (e.g., 31 March 20X6).
IAS 10 applies only to events occurring between Date 1 and Date 3. Once the financial statements are authorized for issue, IAS 10 no longer applies to subsequent events.
Classification of Events
IAS 10 classifies events after the reporting period into two categories: Adjusting events and Non-adjusting events.
1. Adjusting Events
Definition: Events that provide evidence of conditions that existed at the end of the reporting period .
These events shed new light on circumstances that were already present at the year-end but were perhaps uncertain. Because the condition existed at the year-end, the financial statements must be amended to reflect this new, clearer evidence.
Accounting Treatment: Adjust the amounts recognized in the financial statements.
Classic Exam Examples of Adjusting Events:
Insolvency of a customer: A customer goes bankrupt shortly after the year-end. This confirms that the trade receivable balance existing at the year-end was actually irrecoverable. The receivable must be written off as at the reporting date.
Sale of inventory below cost: Inventory held at the year-end is sold shortly afterward at a price lower than its cost. This provides evidence that the Net Realizable Value (NRV) of the inventory was lower than cost at the year-end . Inventory must be written down to NRV in the financial statements (applying IAS 2).
Resolution of a court case: A court case, which was pending at the year-end, is settled. The settlement confirms that the entity had a present obligation at the reporting date. A provision must be recognized or adjusted.
Discovery of fraud or errors: The discovery that financial statements are incorrect due to fraud or errors that occurred before the year-end.
2. Non-Adjusting Events
Definition: Events that are indicative of conditions that arose after the reporting period .
These are brand new events. The conditions causing them did not exist at the year-end. Therefore, adjusting the year-end figures would be misleading, as it would distort the snapshot of the entity's position at that specific date.
Accounting Treatment: Do NOT adjust the amounts recognized in the financial statements. However, if the event is material , it must be disclosed in the notes to the financial statements. The disclosure must include:
The nature of the event.
An estimate of its financial effect (or a statement that such an estimate cannot be made).
Classic Exam Examples of Non-Adjusting Events:
Destruction of assets: A major fire, flood, or natural disaster destroys a factory after the year-end. The factory existed intact at the year-end, so the SOFP should show it. The loss is disclosed.
Decline in market value: A significant decline in the market value of investments between the reporting date and the authorization date. The market value at year-end was valid at that time.
Dividends declared: Dividends declared to equity holders after the reporting period are not recognized as a liability at the end of the reporting period because there was no obligation at that date.
Major business combinations or restructuring: Announcing a plan to acquire another company or undergo massive restructuring after the year-end.
Issuance of shares or bonds: Raising new capital after the year-end.
The Going Concern Exception
There is one major, critical exception to the non-adjusting rule.
If a non-adjusting event is so severe that it indicates the entity is no longer a going concern (e.g., a fire destroys the only factory and the company has no insurance, forcing liquidation), the fundamental basis of accounting changes.
Rule: If management determines after the reporting period that it intends to liquidate the entity or cease trading, or has no realistic alternative but to do so, the financial statements must not be prepared on a going concern basis.
Instead, the financial statements must be completely restated on a break-up basis (where assets are recorded at liquidation values and all liabilities become current), even though the event causing the liquidation occurred after the year-end.
Decision Tree for Exam Questions
When faced with an IAS 10 scenario, follow this logic:
Did the event occur between the reporting date and the authorization date? (If no, IAS 10 does not apply).
Did the condition exist at the reporting date?
YES -> Adjusting event. Change the numbers in the accounts.
NO -> Non-adjusting event. Do the numbers change? No. Is it material? If yes, disclose in notes. Does it destroy going concern? If yes, prepare on a break-up basis.
Mastering the distinction between these two types of events and recognizing the standard exam scenarios (inventory sales, bankrupt customers, fires, dividends) is essential for picking up easy marks.