Chapter 21 • 1.

IAS 10 Events after the

reporting period

Events after the

reporting period

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 Syllabus learning outcomes 1

• Define an event after the reporting period in accordance

with International Financial Reporting Standards.
• Classify events as adjusting or non-adjusting.
• Distinguish between how adjusting and non-adjusting
events are reported in the financial statements.

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 1. IAS 10 Events after the reporting period

Events after the reporting period

• Occur between the reporting date and the date on which
the financial statements are authorised for issue. (IAS 10)

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 IAS 10 Events after the reporting period 2

Adjusting events
• Provide additional evidence of conditions existing at the
reporting date.
• Eg. Bankruptcy of a customer
• Sales of inventory below cost
 Standard accounting
• Change the figures in the financial statements to reflect
adjusting events after the reporting period.

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 IAS 10 Events after the reporting period 5

Examples of adjusting events

• Non-current assets. Determination of purchase price or
proceeds of sale before the end of the reporting period.
• Inventories. Evidence of NRV
• Receivables. Renegotiation by or insolvency of trade
accounts receivable
• Settlement of insurance claims
• Discoveries of error or fraud

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 IAS 10 Events after the reporting period 3
Non-adjusting events
• Concern conditions which did not exist at the reporting date.
Eg. the destruction of a major production plant by a fire after the
reporting period
 Standard accounting
• Disclose non-adjusting event in a note to the financial statements if it
is material.
Notes:
• Dividends proposed or declared after the end of reporting period but
before the financial statements are approved should be disclosed in a
note to the financial statements.
• An entity shall not prepare its financial statements on a going concern
basis if this concept is no longer appropriate.
Events after authorisation of the accounts
• The directors should consider publishing these if material.
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 IAS 10 Events after the reporting period 6

Examples of non-adjusting events

• Issues of shares
• Purchases/sales of non-current assets and investments
• Loss or drop in value of non-current assets or inventories
occurring after the year end
• Expansion or contraction of trade
• Government action or strikes
• Dividends declared after the reporting date

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 Identify adjusting events and non-adjusting events

Assume that the eight events below occurred after the end of
the reporting period. Identify the type of those events:
1. Issuance of new shares
2. Determination of the amount of a bonus payment or profit
sharing if the company had legal or constructive
obligation at the year end.
3. Settlement of court cases
4. Dividend declaration
5. Natural disasters
6. Sale of inventory below cost
7. Decline in fair value of an investment
8. Bankruptcy of a customer
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 Lecture example 1
Which of the following events after the reporting period would normally
qualify as a non-adjusting event?
(1) A fall in the market price of shares held by the entity as
investments.
(2) Insolvency of a trade receivable with a balance of $200,000
outstanding at the end of the reporting period.
(3) Declaration of the year-end dividend by the directors.
(4) Confirmation of the amount of damages awarded to an
employee who sued for unfair dismissal after being sacked two
months before the year end.
A 2 only
B 1 and 3
C 1, 3 and 4
D 2 and 4
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 Lecture example 2

• The directors of a company are considering the company’s draft

financial statements for the year ended 30 Jun 20X4.
• The following material points are unresolved:
(a) One of the company’s major plant was destroyed in a fire in
Aug 20X4. The estimated value of the plant was $3m, but it was
insured for only $2m. The company’s going concern status is
not jeopardized. The directors are unsure what adjustment or
disclosure, if any should be made.
(b) Some goods which had cost $250,000 and which were
included in closing inventory at 30 Jun 20X4 at that figure, were
subsequently sold in Jul 20X4 for $180,000 after they were
found to have deteriorated while held in inventory. The directors
are unsure whether to adjust the inventory figures.

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 Lecture example 2

(c) The company had supplied $330,000 worth of goods to a

customer on a sale or return basis in Jun 20X4. The transaction
was included as a credit sale in the accounting records, and as
a result a profit of $40,000 was taken. In July 20X4 the
customer returned all of the items in good condition.
(d) No allowance has yet been made for account receivable of
$80,000 outstanding at 30 Jun 20X4. In Aug 20X4, the directors
became aware that the debtor was in financial difficulties.
Directors are divided as to whether an allowance should be
made or not.

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 Lecture example 3
• Kamoso has just prepared its draft accounts for the year ending 31
Dec 20X3. There are noted below. The accounts haven’t been
authorized for issue for another 3 months. During this period the
following information comes to light:
(1) In Jan 20X4, a building with a net book value of $250,000 burnt
down. It was not insured.
(2) In Feb 20X4, inventories with a year end cost of $79,000 were sold
for $65,000
(3) In Mar 20X4, a major customer went bankrupt owing $235,000.
The trade receivable was made up as follows:
Date of invoices $
Dec 20X3 64,000
Jan 20X4 123,000
Feb 20X4 48,000
• Total 235,000
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 Lecture example 3

(4) In May 20X4 the directors declared a final dividend of

$180,000 in respect of 20X3
The draft balance sheet of Kamoso is as follows:

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 Lecture example 3

• Require:
(a) Explain how each of these post balance sheet events will be
accounted for
(b) Redraft the balance sheet to incorporate all the adjusting
post balance sheet

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 Specimen exam question

Source: ACCA Paper FFA/F3 Financial Accounting Specimen Exam

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 Specimen exam answer

Source: ACCA Paper FFA/F3 Financial Accounting Specimen Exam

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