IAS 10 – Events After the Reporting Period
Financial statements capture an entity’s financial position at a specific reporting date. However, life doesn’t stop once the books are closed—important events can occur between the end of the reporting period and the date when financial statements are authorized for issue. To address how such events should be treated, the International Accounting Standards Board (IASB) introduced IAS 10 – Events After the Reporting Period.
This standard ensures transparency and reliability by guiding when adjustments are required and when disclosure alone is sufficient.
Do dividends declared after year-end count as liabilities—or just footnotes?
IAS 10 bridges the gap between the reporting date and the reality that unfolds right after.
What Are “Events After the Reporting Period”?
IAS 10 defines these as events, both favorable and unfavorable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue.
This period is critical because such events can influence stakeholders’ decisions if they significantly affect the entity’s financial position or performance.
Types of Events Under IAS 10
1. Adjusting Events
Events that provide additional evidence of conditions that existed at the reporting date. These require adjustments to the amounts recognized in the financial statements.
Examples:- Settlement of a lawsuit that confirms a present obligation existed at year-end.
- Bankruptcy of a customer that proves a receivable was already impaired at the reporting date.
- Discovery of errors or fraud showing financial statements were misstated.
2. Non-Adjusting Events
Events that indicate conditions that arose after the reporting period. These do not require adjustments but may require disclosure if material.
Examples:- A major business combination or disposal of a subsidiary after year-end.
- Natural disasters destroying assets after the reporting period.
- Announcing a restructuring plan after the reporting date.
Dividends
Dividends declared after the reporting period are not recognized as a liability at the reporting date, because no obligation existed then. Instead, they are disclosed in the notes to the financial statements.
Disclosure Requirements
For material non-adjusting events, an entity must disclose:
- The nature of the event.
- An estimate of its financial effect, or a statement that such an estimate cannot be made.
This ensures users of financial statements are aware of significant developments even if they do not impact the amounts reported at year-end.
Practical Importance of IAS 10
- Relevance: Ensures financial statements reflect the most accurate picture of conditions at year-end.
- Transparency: Provides stakeholders with insights about significant events occurring before issuance.
- Consistency: Establishes a clear framework across industries and jurisdictions.
Conclusion
IAS 10 – Events After the Reporting Period plays a crucial role in bridging the gap between the reporting date and the issuance date of financial statements. By distinguishing between adjusting and non-adjusting events, and clarifying the treatment of dividends, the standard ensures financial reporting remains both reliable and relevant for stakeholders.
