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Financial Accounting · Events after the reporting period

Adjusting Events After the Reporting Period under IAS 10

Updated 11 October 2026 · Fact-checked

An adjusting event is an event after the reporting period that gives further evidence of a condition that already existed at the year end. Under IAS 10 you change the recognised figures. Typical cases are a court case settled, a customer going insolvent, and inventory sold below cost. Update the receivable, provision or inventory, then post the double entry.

Understand Adjusting Events After the Reporting Period

The reporting period ends on the year-end date, for example 31 December. The financial statements are then authorised for issue some weeks later. IAS 10 deals with events that happen in between. These are events after the reporting period.

Some of these events tell you more about something that was already true at the year end. These are adjusting events. The financial statements must be changed so the figures reflect the best evidence available. The condition existed at the year end, and you only learned its true size later.

The classic examples are easy to remember. A court case was ongoing at the year end and is settled after it, which confirms a present obligation. A customer owed money at the year end and goes insolvent soon after, which shows the receivable was already impaired. Inventory was held at cost at the year end but is sold afterwards for less than cost, which gives evidence of net realisable value (NRV) at the year end.

The test is simple. Ask: did the condition exist at the year end? If yes, the event is adjusting. If the condition arose only after the year end, it is non-adjusting, and you only disclose it if it is material. This page covers adjusting events only.

In the exam, you will usually be asked to find the correct adjustment to profit, receivables, inventory or provisions, or to pick which items are adjusting events.

Key formulas to remember

Adjusting event test
Condition existed at the reporting date + evidence arrives before authorisation for issue → ADJUST
The event must fall between the reporting date and the date the financial statements are authorised for issue.
Irrecoverable receivable after year end
Dr Irrecoverable debts expense; Cr Trade receivables
Use for a customer who becomes insolvent after the year end, where the debt existed at the year end. Write off the amount you do not expect to recover.
Court case settled, provision not yet made
Dr Profit or loss (expense); Cr Provision (liability)
Use when the settlement confirms a present obligation at the year end.
Court case settled, provision already made
Adjust provision to the settlement amount: difference to profit or loss
If the settlement is higher, increase the provision. If lower, release the excess.
Inventory NRV evidence
Write-down = Cost − NRV, per item or group, where NRV < cost
Dr Cost of sales; Cr Inventory. Inventory is held at the lower of cost and NRV under IAS 2.

How to solve Adjusting Events After the Reporting Period questions

Use this method for any question on adjusting events. Work through it in order and do not skip the timing check.

  1. 1Note the reporting date and the date the financial statements are authorised for issue.
  2. 2Check the event falls between those two dates. If it falls outside, ignore it for IAS 10.
  3. 3Ask whether the condition existed at the reporting date. Court case already ongoing, debt already owed, inventory already held: yes.
  4. 4If yes, it is adjusting. Decide which figure changes: receivables, inventory, a provision or a liability.
  5. 5Work out the amount. For a receivable use the amount unlikely to be recovered. For inventory use cost minus NRV. For a case use the settlement amount.
  6. 6Post the double entry and state the effect on profit and on the statement of financial position.
  7. 7Recalculate the totals the question asks for, such as adjusted profit or net current assets.

Quickest way: Two-question filter

When to use it: Use in Section A objective test questions where you must classify an event or find the adjustment quickly.

  1. Question 1: did the event happen before the financial statements were authorised for issue? If no, stop.
  2. Question 2: did the underlying situation exist at the year end? If yes, adjust. If no, it is non-adjusting.
  3. For the amount, only change the figure by the difference between what is recorded and the new evidence.
  4. Profit falls for a new loss and rises for a released provision. Check the direction before you answer.

Common mistakes in Adjusting Events After the Reporting Period

  • Treating a customer insolvency as non-adjusting because it happened after the year end.

    Students focus on the date of the event rather than the date of the condition.

    Fix: If the debt was owed at the year end, the insolvency confirms that it was already impaired. Write it off.

  • Only disclosing a court case settlement instead of adjusting.

    Students confuse adjusting events with non-adjusting events that need only a note.

    Fix: A case already under way at the year end that settles later confirms an obligation. Adjust the provision.

  • Adding the full settlement to a provision that already exists.

    Students forget that part of the cost was already recognised.

    Fix: Adjust only the difference between the settlement and the existing provision.

  • Writing inventory down to selling price instead of NRV.

    NRV is read as the sales price.

    Fix: NRV is selling price less costs to complete and costs to sell. Use cost minus NRV for the write-down.

  • Including events after the authorisation date.

    Students ignore the window and treat every later event as relevant.

    Fix: IAS 10 only covers events up to the date the financial statements are authorised for issue.

  • Posting the adjustment to the wrong side of the entry.

    Students think about the asset or liability and forget the profit effect.

    Fix: Losses are debited to profit or loss. Reduce the asset with a credit, or increase the liability with a credit.

Worked examples

Example 1

At 31 December, Delta had trade receivables of $180,000. On 20 January, before the financial statements were authorised, a customer owing $12,000 at the year end went into liquidation, and nothing is expected to be recovered. Profit before this item was $95,000. State the adjustment and revised profit and receivables.

Show the solution
  1. The debt existed at the year end and the customer's insolvency gives evidence of impairment. It is an adjusting event.
  2. Write off $12,000: Dr Irrecoverable debts expense $12,000; Cr Trade receivables $12,000.
  3. Revised profit = $95,000 − $12,000 = $83,000.
  4. Revised receivables = $180,000 − $12,000 = $168,000.

Answer: Adjust: profit is $83,000 and trade receivables are $168,000.

Example 2

At 31 March, Kiln had no provision for a court case that began in the year. On 15 May, before authorisation of the financial statements, the court ordered Kiln to pay $40,000 in damages. Inventory costing $25,000 at the year end was sold on 10 April for net proceeds of $18,000 after selling costs. Profit before these items was $210,000. Find the revised profit.

Show the solution
  1. The court case was ongoing at the year end, so the settlement confirms an obligation. It is adjusting.
  2. Provision: Dr Profit or loss $40,000; Cr Provision $40,000.
  3. The post year-end sale gives evidence of NRV at the year end. NRV is $18,000 against cost of $25,000, so it is adjusting.
  4. Inventory write-down = $25,000 − $18,000 = $7,000. Dr Cost of sales $7,000; Cr Inventory $7,000.
  5. Total reduction in profit = $40,000 + $7,000 = $47,000.
  6. Revised profit = $210,000 − $47,000 = $163,000.

Answer: Revised profit is $163,000, with a $40,000 provision recognised and inventory reduced by $7,000.

Exam tips

  • Look for the dates first. Many questions include an event that falls after authorisation and should be ignored.
  • For multiple response items, pick all events where the condition existed at the year end, such as customer insolvency, case settlement and NRV evidence.
  • In number entry questions, show the profit effect first, then check whether the question asks for profit, receivables or inventory.
  • If a provision already exists, calculate only the extra amount needed. Check this before entering your answer.
  • Watch the wording 'gives evidence of conditions at the year end'. It signals an adjusting event.

Practice questions from Events after the reporting period

Adjusting Events After the Reporting Period in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Adjusting Events After the Reporting Period: frequently asked questions

Is a court case settlement after the reporting period adjusting or non-adjusting?

It is usually adjusting if the case was already under way at the year end. The settlement confirms a present obligation that existed then. Adjust or create the provision for the settlement amount.

How do I account for a customer insolvency after the year end under IAS 10?

If the customer owed the money at the year end, treat the insolvency as an adjusting event. Write off the irrecoverable amount: debit irrecoverable debts expense and credit trade receivables.

Why does selling inventory after the year end matter?

A sale below cost shows that the net realisable value at the year end was below cost. IAS 2 requires inventory at the lower of cost and NRV, so you write it down.

What is the cut-off date for adjusting events?

The date the financial statements are authorised for issue. Events before that date are within IAS 10. Events after it are outside its scope.