CA Final · Financial Reporting

Ind AS 10 Events after the Reporting Period: formula sheet

Full chapter guide

Key formulas

Definition: events after the reporting period: Period = end of reporting period → date of authorisation for issue; Includes favourable and unfavourable events. Events occurring up to the date of authorisation are considered.
Adjusting event rule: Evidence of conditions existing at reporting date → adjust recognised amounts; Example: settlement of a court case after year-end confirming a present obligation at year-end.
Non-adjusting event rule: Conditions arising after reporting date → do not adjust; disclose if material; For each material category of non-adjusting event, disclose the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made.
Date of authorisation disclosure: Disclose date of authorisation for issue and who gave it; Also disclose if owners or others can amend the statements after issue.
Materiality for non-adjusting events: Non-disclosure could influence economic decisions of users → disclose; Disclosure is needed only where the event is material.
Definition of events after the reporting period: Events between the end of the reporting period and the date the financial statements are approved for issue; Applies to favourable and unfavourable events. Both adjusting and non-adjusting events fall in this window.
Test for adjusting event: Event provides evidence of conditions that existed at the end of the reporting period → ADJUST; If the condition arose after the reporting date, it is non-adjusting. Do not adjust, but disclose if material.
Adjustment amount (litigation): Adjustment = Settlement amount − Provision already recognised; If there was no provision and the settlement confirms a present obligation, recognise the full amount as a provision. If the result is positive, increase the provision; if negative, reverse the excess.
Adjustment amount (customer insolvency): Additional loss = Carrying amount of receivable − Amount expected to be recovered − Allowance already made; Recovery is estimated from the insolvency position. Adjust the loss allowance.
Inventory write-down: Write-down = Cost − Net realisable value (only if NRV < cost); Post year-end selling prices are evidence of NRV at year end. Use NRV net of selling costs.
Dividend declared after the reporting period: Liability at reporting date = Nil; disclose amount and per-share amount in notes; Applies to dividends to holders of equity instruments declared after the reporting period but before the financial statements are approved for issue.
Date of recognition of dividend: Recognise as a distribution (reduction in equity) in the period in which it is approved/declared as required; A dividend declared on or before the reporting date is a liability at that date. Dividends declared after it are not. Where shareholders' approval is needed, the obligation arises only on that approval (for example, at the AGM), not on the board's recommendation. Until then, you only disclose it.
Going concern rule: Intention or necessity to liquidate or cease trading after the period ⇒ do not prepare on going concern basis; Applies even if the deterioration happens after the reporting period but before approval of the statements.
Approval date cut-off: Events considered: reporting date to date financial statements are authorised for issue; Events after approval for issue are outside Ind AS 10 adjustment and disclosure scope for that set of statements.

Quick revision

Events after the reporting period are events, favourable or unfavourable, between the end of the reporting period and the date the financial statements are authorised for issue.
Two types: adjusting events and non-adjusting events.
Adjusting events give evidence of conditions that existed at the end of the reporting period, so you adjust the recognised amounts.
Non-adjusting events relate to conditions that arose after the reporting period, so you do not adjust the amounts.
Disclose material non-adjusting events: the nature of the event and an estimate of its financial effect, or a statement that no estimate can be made.
Dividends declared after the reporting period on equity instruments are not recognised as a liability at the end of the reporting period.
Such dividends are disclosed in the notes under Ind AS 1.
If management decides after the reporting period to liquidate the entity or stop trading, or has no realistic alternative, the financial statements are not prepared on a going concern basis.
A deterioration in operating results and financial position after the reporting period may also indicate that the going concern assumption is no longer appropriate. If it is not, the basis of preparation must change.
Disclose the date on which the financial statements were authorised for issue and who gave the authorisation.
A court settlement after the reporting period that confirms an obligation existing at the reporting date is adjusting, so adjust any provision already made or recognise a new one.
Always ask whether the condition existed at the reporting date. The date of the event alone does not decide the answer.

Common mistakes

Treating shareholder approval at the AGM as the date of authorisation for issue. Fix: Use the date the statements are authorised for issue, which for a company is generally the board approval date. Events after that date are outside the standard's window.
Classifying an event as adjusting just because it is unfavourable or large. Fix: Classify only by whether the condition existed at the reporting date. A big fire after year-end is still non-adjusting.
Adjusting for events that happened after the approval date. Fix: Check that the event occurs before the date of approval of the financial statements. Later events are not covered by Ind AS 10 adjustment.
Treating customer insolvency as non-adjusting because it occurred in April. Fix: A customer's insolvency after year end normally confirms that the receivable was already impaired at year end. Adjust, unless the question shows the loss was caused by a later event.
Providing for a proposed dividend as a liability in the balance sheet. Fix: Under Ind AS 10, a dividend declared after the reporting period gives no liability. Disclose it in the notes.
Treating a dividend declared before the reporting date but paid after it as a non-adjusting event. Fix: The test is declaration (obligation), not payment. If declared on or before the reporting date, it is a liability at that date.

Exam tips

Always write the two dates at the top of your answer. Examiners look for the correct cut-off.
Use the phrase 'evidence of conditions that existed at the end of the reporting period' for adjusting events and 'conditions that arose after the reporting period' for non-adjusting ones.
In case scenarios, a date such as the AGM or a later press release may be given alongside the board approval date. Take the cut-off from the date the statements were authorised for issue, which for a company is generally the board approval date.
For non-adjusting events, always state the disclosure content: nature and estimate of financial effect. Do not stop at 'no adjustment'.
In MCQs, test the event against the reporting date condition, not the size of the amount.
Write the three dates first. Many marks go for correct classification, and the dates justify it.
Give a one-line reason for each classification: 'condition existed at the reporting date' or 'condition arose after'.
Show the working for the adjustment amount as new figure less existing figure. Partial marks depend on it.