Textbook

1. The context and purpose of financial reporting

2. Accounting principles, concepts and qualitative characteristics

3. Double-entry bookkeeping and accounting systems

4. Recording transactions and events

5. Reconciliations

6. Preparing trial balance

7. Preparing financial statements

7.1 Statements of profit or loss and financial position

7.2 Statement of cash flow

7.3 Incomplete records

7.4 Events after the reporting period

7.5 Disclosure-notes

8. Preparing basic consolidated financial statements

9. Interpretation of financial statements

Wrapping up

7.4 Events after the reporting period

Achievable ACCA Financial Accounting

7. Preparing financial statements

Our ACCA course is currently in development and is a work-in-progress.

Events after the reporting period

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This chapter explains what can happen between the reporting date and the date the financial statements are authorised for issue. It shows you how to identify adjusting and non-adjusting events, and how each type is recognised or disclosed to support accurate, transparent, IFRS-compliant financial reporting.

Definitions

Event after the reporting period: It is defined under IAS 10 as “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.”

End of reporting period: The last day of the financial year (e.g., December 31, 2024)
Authorisation date: The date the board of directors approves the financial statements for issue

Any events occurring within this window are considered “events after the reporting period.”

Classification of events

Events after the reporting period fall into two categories:

Adjusting events
Non-adjusting events

Definitions

Adjusting events: These are events that provide evidence of conditions that existed at the reporting date. In other words, they confirm or clarify what was already true at year-end. Examples:

Settlement of a court case that confirms a liability existed at year-end
Discovery of fraud or errors showing that the financial statements were incorrect
Bankruptcy of a customer, confirming that the receivable was impaired at year-end
Determination of the sale price of assets sold before year-end
Sale of inventory after year-end at less than cost, giving evidence of its net realisable value at the reporting date

Definitions

Non-adjusting events: These are events that indicate conditions that arose after the reporting date. They reflect new circumstances that didn’t exist at year-end. Examples:

Major business combinations or disposals after year-end
Announcement of plans to discontinue operations
Destruction of assets by fire or flood after year-end
Decline in market value of investments after year-end
Issue of shares or debt securities after year-end
Equity dividends declared after the reporting date, which are not recognised as a liability at year-end (IAS 10, paragraph 12) but are disclosed in the notes

Reporting treatment

Adjusting events

Financial statements must be adjusted to reflect these events.

Adjust the amounts recognised in the financial statements to reflect the new information.
These adjustments ensure the financial statements present the financial position as of the reporting date.
The amounts are adjusted directly. Any existing disclosures about those year-end conditions are updated to reflect the new information; no separate note describing the event itself is needed.

Non-adjusting events

Financial statements are not adjusted. However, if a non-adjusting event is material, it must be disclosed in the notes. Disclosure includes:

The nature of the event
An estimate of the financial effect (or a statement that such an estimate cannot be made)

This disclosure helps users understand significant developments after year-end and avoids misleading conclusions about the entity’s financial position.

Special case - going concern: If events after the reporting period show that the going concern assumption is no longer appropriate, IAS 10 requires a fundamental change in the basis of accounting - the financial statements are no longer prepared on a going concern basis - rather than being treated as an adjustment within the existing basis.

Illustration: Identifying, adjusting, and non-adjusting events

Tamako Ltd has a December 31, 2024, year-end. The financial statements were authorised for issue by the board of directors on March 15, 2025.

The following events occurred between January 1, 2025, and March 15, 2025. For each event: indicate whether it is an adjusting or non-adjusting event and explain your reasons. Indicate the implication (treatment) on the financial statements.

Event 1: On January 20, 2025, a major customer, XYZ Co, declared bankruptcy. XYZ Co owed Tamako Ltd $120,000 at December 31, 2024. Investigations revealed that XYZ Co had been experiencing severe financial difficulties throughout the last quarter of 2024.

Do you know the answer?

(spoiler)

It is an adjusting event.
It is so because the bankruptcy provides evidence that the receivable was impaired at December 31, 2024, as XYZ Co was experiencing financial difficulties in the last quarter of 2024. The condition existed at year-end.
The financial statements will be adjusted by writing off the $120,000 receivable and recognising an irrecoverable debt expense in the 2024 financial statements.

Event 2: On February 5, 2025, Tamako Ltd’s main warehouse was destroyed by a flood. The warehouse had a carrying amount of $800,000 at December 31, 2024, and was insured for $600,000. The flood was caused by unprecedented rainfall in February 2025.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The flood occurred in February 2025 due to unprecedented rainfall. This is a new condition that arose after year-end; the warehouse was intact as of December 31, 2024.
Treatment: No adjustment to financial statements. Disclose the event, describing the flood, estimated loss of $200,000 ($800,000 - $600,000 insurance), and impact on operations.

Event 3: On February 28, 2025, a court case was settled. Tamako Ltd had been sued by a supplier for breach of contract. The lawsuit was filed in November 2024, and Tamako Ltd’s lawyers had advised that a loss was probable and estimated at $150,000. The court ordered Tamako Ltd to pay $180,000. Tamako Ltd had recognised a provision of $150,000 at December 31, 2024.

Do you know the answer?

(spoiler)

It is an adjusting event.
Reason: The court case confirms a liability that existed as of December 31, 2024. The lawsuit was filed in November 2024, providing evidence about the obligation’s amount at year-end.
Treatment: Adjust the provision from $150,000 to $180,000, recognising an additional $30,000 expense in the 2024 financial statements.

Event 4: On March 10, 2025, Tamako Ltd announced a major restructuring plan that will result in 100 employees being made redundant. The plan was developed and announced entirely in March 2025. The estimated cost of redundancy payments is $500,000.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The restructuring plan was developed and announced entirely in March 2025. No obligation or condition existed as of December 31, 2024. This represents a new management decision after year-end.
Treatment: No adjustment to financial statements. Disclose the restructuring plan, estimated redundancy costs of $500,000, and expected impact on future operations.

Events After the Reporting Period (IAS 10)

Defined as events occurring between the end of reporting period (year-end date) and the authorisation date (when board approves financials for issue)
Two categories: adjusting and non-adjusting events

Adjusting Events

Provide evidence of conditions that existed at the reporting date
Examples: court case settlement confirming year-end liability, customer bankruptcy confirming impaired receivable, fraud/error discovery, determining sale price of assets sold pre-year-end, inventory sold below cost revealing NRV at year-end
Treatment: must adjust amounts in financial statements; update related disclosures (no separate event note needed)

Non-Adjusting Events

Indicate conditions that arose after the reporting date (new circumstances)
Examples: business combinations/disposals, discontinued operations announcements, fire/flood destruction, investment value declines, share/debt issuances, dividends declared post year-end
Treatment: no adjustment to figures; if material, disclose nature of event and estimated financial effect (or state why estimate isn’t possible)

Special Case & Application

If going concern assumption becomes invalid due to post-reporting events, IAS 10 requires a fundamental change in basis of accounting (not just an adjustment)
Key test for classification: ask whether the underlying condition existed at year-end (adjusting) or arose only afterward (non-adjusting)
Example pattern: receivable impairment/court case confirmed by later events = adjusting; new disasters, new management decisions (restructuring plans) made after year-end = non-adjusting

Next | 7.5 Disclosure-notes

Events after the reporting period

Definitions

Event after the reporting period: It is defined under IAS 10 as “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.”

End of reporting period: The last day of the financial year (e.g., December 31, 2024)
Authorisation date: The date the board of directors approves the financial statements for issue

Any events occurring within this window are considered “events after the reporting period.”

Classification of events

Events after the reporting period fall into two categories:

Adjusting events
Non-adjusting events

Definitions

Adjusting events: These are events that provide evidence of conditions that existed at the reporting date. In other words, they confirm or clarify what was already true at year-end. Examples:

Settlement of a court case that confirms a liability existed at year-end
Discovery of fraud or errors showing that the financial statements were incorrect
Bankruptcy of a customer, confirming that the receivable was impaired at year-end
Determination of the sale price of assets sold before year-end
Sale of inventory after year-end at less than cost, giving evidence of its net realisable value at the reporting date

Definitions

Non-adjusting events: These are events that indicate conditions that arose after the reporting date. They reflect new circumstances that didn’t exist at year-end. Examples:

Major business combinations or disposals after year-end
Announcement of plans to discontinue operations
Destruction of assets by fire or flood after year-end
Decline in market value of investments after year-end
Issue of shares or debt securities after year-end
Equity dividends declared after the reporting date, which are not recognised as a liability at year-end (IAS 10, paragraph 12) but are disclosed in the notes

Reporting treatment

Adjusting events

Financial statements must be adjusted to reflect these events.

Adjust the amounts recognised in the financial statements to reflect the new information.
These adjustments ensure the financial statements present the financial position as of the reporting date.
The amounts are adjusted directly. Any existing disclosures about those year-end conditions are updated to reflect the new information; no separate note describing the event itself is needed.

Non-adjusting events

Financial statements are not adjusted. However, if a non-adjusting event is material, it must be disclosed in the notes. Disclosure includes:

The nature of the event
An estimate of the financial effect (or a statement that such an estimate cannot be made)

This disclosure helps users understand significant developments after year-end and avoids misleading conclusions about the entity’s financial position.

Special case - going concern: If events after the reporting period show that the going concern assumption is no longer appropriate, IAS 10 requires a fundamental change in the basis of accounting - the financial statements are no longer prepared on a going concern basis - rather than being treated as an adjustment within the existing basis.

Illustration: Identifying, adjusting, and non-adjusting events

Tamako Ltd has a December 31, 2024, year-end. The financial statements were authorised for issue by the board of directors on March 15, 2025.

Do you know the answer?

(spoiler)

It is an adjusting event.
It is so because the bankruptcy provides evidence that the receivable was impaired at December 31, 2024, as XYZ Co was experiencing financial difficulties in the last quarter of 2024. The condition existed at year-end.
The financial statements will be adjusted by writing off the $120,000 receivable and recognising an irrecoverable debt expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The flood occurred in February 2025 due to unprecedented rainfall. This is a new condition that arose after year-end; the warehouse was intact as of December 31, 2024.
Treatment: No adjustment to financial statements. Disclose the event, describing the flood, estimated loss of $200,000 ($800,000 - $600,000 insurance), and impact on operations.

Do you know the answer?

(spoiler)

It is an adjusting event.
Reason: The court case confirms a liability that existed as of December 31, 2024. The lawsuit was filed in November 2024, providing evidence about the obligation’s amount at year-end.
Treatment: Adjust the provision from $150,000 to $180,000, recognising an additional $30,000 expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The restructuring plan was developed and announced entirely in March 2025. No obligation or condition existed as of December 31, 2024. This represents a new management decision after year-end.
Treatment: No adjustment to financial statements. Disclose the restructuring plan, estimated redundancy costs of $500,000, and expected impact on future operations.

Achievable ACCA Financial Accounting

7. Preparing financial statements

Our ACCA course is currently in development and is a work-in-progress.

Events after the reporting period

6 min read

Font

Discuss

Feedback

Definitions

Event after the reporting period: It is defined under IAS 10 as “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.”

End of reporting period: The last day of the financial year (e.g., December 31, 2024)
Authorisation date: The date the board of directors approves the financial statements for issue

Any events occurring within this window are considered “events after the reporting period.”

Classification of events

Events after the reporting period fall into two categories:

Adjusting events
Non-adjusting events

Definitions

Adjusting events: These are events that provide evidence of conditions that existed at the reporting date. In other words, they confirm or clarify what was already true at year-end. Examples:

Settlement of a court case that confirms a liability existed at year-end
Discovery of fraud or errors showing that the financial statements were incorrect
Bankruptcy of a customer, confirming that the receivable was impaired at year-end
Determination of the sale price of assets sold before year-end
Sale of inventory after year-end at less than cost, giving evidence of its net realisable value at the reporting date

Definitions

Non-adjusting events: These are events that indicate conditions that arose after the reporting date. They reflect new circumstances that didn’t exist at year-end. Examples:

Major business combinations or disposals after year-end
Announcement of plans to discontinue operations
Destruction of assets by fire or flood after year-end
Decline in market value of investments after year-end
Issue of shares or debt securities after year-end
Equity dividends declared after the reporting date, which are not recognised as a liability at year-end (IAS 10, paragraph 12) but are disclosed in the notes

Reporting treatment

Adjusting events

Financial statements must be adjusted to reflect these events.

Adjust the amounts recognised in the financial statements to reflect the new information.
These adjustments ensure the financial statements present the financial position as of the reporting date.
The amounts are adjusted directly. Any existing disclosures about those year-end conditions are updated to reflect the new information; no separate note describing the event itself is needed.

Non-adjusting events

Financial statements are not adjusted. However, if a non-adjusting event is material, it must be disclosed in the notes. Disclosure includes:

The nature of the event
An estimate of the financial effect (or a statement that such an estimate cannot be made)

This disclosure helps users understand significant developments after year-end and avoids misleading conclusions about the entity’s financial position.

Special case - going concern: If events after the reporting period show that the going concern assumption is no longer appropriate, IAS 10 requires a fundamental change in the basis of accounting - the financial statements are no longer prepared on a going concern basis - rather than being treated as an adjustment within the existing basis.

Illustration: Identifying, adjusting, and non-adjusting events

Tamako Ltd has a December 31, 2024, year-end. The financial statements were authorised for issue by the board of directors on March 15, 2025.

Do you know the answer?

(spoiler)

It is an adjusting event.
It is so because the bankruptcy provides evidence that the receivable was impaired at December 31, 2024, as XYZ Co was experiencing financial difficulties in the last quarter of 2024. The condition existed at year-end.
The financial statements will be adjusted by writing off the $120,000 receivable and recognising an irrecoverable debt expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The flood occurred in February 2025 due to unprecedented rainfall. This is a new condition that arose after year-end; the warehouse was intact as of December 31, 2024.
Treatment: No adjustment to financial statements. Disclose the event, describing the flood, estimated loss of $200,000 ($800,000 - $600,000 insurance), and impact on operations.

Do you know the answer?

(spoiler)

It is an adjusting event.
Reason: The court case confirms a liability that existed as of December 31, 2024. The lawsuit was filed in November 2024, providing evidence about the obligation’s amount at year-end.
Treatment: Adjust the provision from $150,000 to $180,000, recognising an additional $30,000 expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The restructuring plan was developed and announced entirely in March 2025. No obligation or condition existed as of December 31, 2024. This represents a new management decision after year-end.
Treatment: No adjustment to financial statements. Disclose the restructuring plan, estimated redundancy costs of $500,000, and expected impact on future operations.

Events After the Reporting Period (IAS 10)

Defined as events occurring between the end of reporting period (year-end date) and the authorisation date (when board approves financials for issue)
Two categories: adjusting and non-adjusting events

Adjusting Events

Provide evidence of conditions that existed at the reporting date
Examples: court case settlement confirming year-end liability, customer bankruptcy confirming impaired receivable, fraud/error discovery, determining sale price of assets sold pre-year-end, inventory sold below cost revealing NRV at year-end
Treatment: must adjust amounts in financial statements; update related disclosures (no separate event note needed)

Non-Adjusting Events

Indicate conditions that arose after the reporting date (new circumstances)
Examples: business combinations/disposals, discontinued operations announcements, fire/flood destruction, investment value declines, share/debt issuances, dividends declared post year-end
Treatment: no adjustment to figures; if material, disclose nature of event and estimated financial effect (or state why estimate isn’t possible)

Special Case & Application

If going concern assumption becomes invalid due to post-reporting events, IAS 10 requires a fundamental change in basis of accounting (not just an adjustment)
Key test for classification: ask whether the underlying condition existed at year-end (adjusting) or arose only afterward (non-adjusting)
Example pattern: receivable impairment/court case confirmed by later events = adjusting; new disasters, new management decisions (restructuring plans) made after year-end = non-adjusting

Next | 7.5 Disclosure-notes

Events after the reporting period

Definitions

Event after the reporting period: It is defined under IAS 10 as “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.”

End of reporting period: The last day of the financial year (e.g., December 31, 2024)
Authorisation date: The date the board of directors approves the financial statements for issue

Any events occurring within this window are considered “events after the reporting period.”

Classification of events

Events after the reporting period fall into two categories:

Adjusting events
Non-adjusting events

Definitions

Adjusting events: These are events that provide evidence of conditions that existed at the reporting date. In other words, they confirm or clarify what was already true at year-end. Examples:

Settlement of a court case that confirms a liability existed at year-end
Discovery of fraud or errors showing that the financial statements were incorrect
Bankruptcy of a customer, confirming that the receivable was impaired at year-end
Determination of the sale price of assets sold before year-end
Sale of inventory after year-end at less than cost, giving evidence of its net realisable value at the reporting date

Definitions

Non-adjusting events: These are events that indicate conditions that arose after the reporting date. They reflect new circumstances that didn’t exist at year-end. Examples:

Major business combinations or disposals after year-end
Announcement of plans to discontinue operations
Destruction of assets by fire or flood after year-end
Decline in market value of investments after year-end
Issue of shares or debt securities after year-end
Equity dividends declared after the reporting date, which are not recognised as a liability at year-end (IAS 10, paragraph 12) but are disclosed in the notes

Reporting treatment

Adjusting events

Financial statements must be adjusted to reflect these events.

Adjust the amounts recognised in the financial statements to reflect the new information.
These adjustments ensure the financial statements present the financial position as of the reporting date.
The amounts are adjusted directly. Any existing disclosures about those year-end conditions are updated to reflect the new information; no separate note describing the event itself is needed.

Non-adjusting events

Financial statements are not adjusted. However, if a non-adjusting event is material, it must be disclosed in the notes. Disclosure includes:

The nature of the event
An estimate of the financial effect (or a statement that such an estimate cannot be made)

This disclosure helps users understand significant developments after year-end and avoids misleading conclusions about the entity’s financial position.

Special case - going concern: If events after the reporting period show that the going concern assumption is no longer appropriate, IAS 10 requires a fundamental change in the basis of accounting - the financial statements are no longer prepared on a going concern basis - rather than being treated as an adjustment within the existing basis.

Illustration: Identifying, adjusting, and non-adjusting events

Tamako Ltd has a December 31, 2024, year-end. The financial statements were authorised for issue by the board of directors on March 15, 2025.

Do you know the answer?

(spoiler)

It is an adjusting event.
It is so because the bankruptcy provides evidence that the receivable was impaired at December 31, 2024, as XYZ Co was experiencing financial difficulties in the last quarter of 2024. The condition existed at year-end.
The financial statements will be adjusted by writing off the $120,000 receivable and recognising an irrecoverable debt expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The flood occurred in February 2025 due to unprecedented rainfall. This is a new condition that arose after year-end; the warehouse was intact as of December 31, 2024.
Treatment: No adjustment to financial statements. Disclose the event, describing the flood, estimated loss of $200,000 ($800,000 - $600,000 insurance), and impact on operations.

Do you know the answer?

(spoiler)

It is an adjusting event.
Reason: The court case confirms a liability that existed as of December 31, 2024. The lawsuit was filed in November 2024, providing evidence about the obligation’s amount at year-end.
Treatment: Adjust the provision from $150,000 to $180,000, recognising an additional $30,000 expense in the 2024 financial statements.

Do you know the answer?

(spoiler)

It is a non-adjusting event.
Reason: The restructuring plan was developed and announced entirely in March 2025. No obligation or condition existed as of December 31, 2024. This represents a new management decision after year-end.
Treatment: No adjustment to financial statements. Disclose the restructuring plan, estimated redundancy costs of $500,000, and expected impact on future operations.