Financial Accounting · Events after the reporting period

IAS 10 Dividends Declared and Going Concern After Year End

Updated 11 October 2026 · Fact-checked

Under IAS 10, a dividend declared after the reporting period is not a liability at the year-end date, because no obligation existed then. You disclose it in the notes. If operations deteriorate so badly after year end that the entity cannot continue, it is not a normal adjusting or non-adjusting event: you stop using the going concern basis.

Understand Dividends Declared and Going Concern After Year End

IAS 10 Events after the Reporting Period deals with events between the reporting date and the date the financial statements are authorised for issue. Some events give more evidence about conditions at the reporting date. These are adjusting events. Others concern conditions that arose after the reporting date. These are non-adjusting events.

Dividends are the classic non-adjusting case. A liability exists only if there is a present obligation at the reporting date. If a dividend to equity holders is declared after the reporting date, there is no obligation at that date. So you do not recognise a liability or deduct the dividend from retained earnings in that year. You disclose the amount in the notes instead.

The timing of declaration matters. If the dividend was declared on or before the year-end date, the obligation existed and you recognise it. The date it is paid does not decide the treatment. The declaration date does. A proposed final dividend that shareholders approve after year end is therefore disclosed only.

Going concern works differently. The financial statements are normally prepared assuming the entity will continue in business for the foreseeable future. If, after the reporting date, management decides to liquidate the entity or stop trading, or has no realistic alternative, the effect is so pervasive that it is not handled as an ordinary adjusting or non-adjusting event. IAS 10 requires a fundamental change in the basis of accounting, not just an adjustment to recognised amounts (IAS 10.14-16). Deterioration in operating results and financial position after the reporting date can also show the assumption is no longer appropriate. In that case the statements must not be prepared on a going concern basis. Assets and liabilities are then usually measured on a different basis, and you disclose that fact and the basis used.

A smaller worsening, such as a drop in trading that does not threaten survival, does not break the going concern basis. It is judged on its seriousness.

Key formulas to remember

Dividend declared after the reporting date: No liability at year end; disclose in notes; Applies to dividends to equity holders declared after the reporting period but before the statements are authorised.
Dividend declared on or before the reporting date: Dr Retained earnings, Cr Dividend payable (liability); The obligation exists at the reporting date, so it is recognised.
Adjusting event: Provides evidence of conditions at the reporting date → adjust amounts; Examples include a customer going bankrupt that confirms a receivable was impaired at year end.
Non-adjusting event: Conditions arose after the reporting date → disclose if material; Disclose the nature of the event and an estimate of its financial effect.
Going concern after year end: Intention or need to liquidate or cease trading → not a going concern basis; This is not treated as a normal adjusting or non-adjusting event. The effect is so pervasive that the basis of accounting must change (IAS 10.14-16). Disclose that the statements are not prepared on a going concern basis.

How to solve Dividends Declared and Going Concern After Year End questions

Use this method for any IAS 10 question on dividends or going concern.

1Find the reporting date and the date the statements are authorised for issue. The event must fall between them.
2Identify the event. Is it a dividend, a deterioration in business, or something else?
3For a dividend, check the declaration date against the reporting date. Declared on or before: liability. Declared after: no liability.
4For deterioration, ask whether it threatens survival or means management will liquidate or cease trading. If yes, the going concern basis is no longer appropriate.
5For other events, classify the event as adjusting or non-adjusting. Loss of going concern is the exception: it requires a change in the basis of preparation.
6State the accounting action: recognise or adjust, or disclose only, or change the basis of preparation.
7Check the option wording carefully and choose the one that matches your conclusion.

Quickest way: Date test and survival test

When to use it: Use this in multiple-choice and multiple-response questions when time is short.

Dividend: look only at the declaration date. After year end means note only.
Going concern: ask if the business can survive. If not, the basis of preparation changes.
Reject any option that books a liability for a dividend declared after year end.
Reject any option that keeps going concern when liquidation is planned.

Common mistakes in Dividends Declared and Going Concern After Year End

Recognising a liability for a final dividend declared after the year end.
Students think the profit earned in the year creates the dividend obligation.
Fix: A liability needs a present obligation at the reporting date. Declaration after the date means disclosure only.
Using the payment date to decide the treatment.
Payment feels like the key event.
Fix: Use the declaration date. A dividend declared before year end but paid after is still a liability at year end.
Treating all poor trading after year end as breaking going concern.
Students assume any bad news is serious.
Fix: Only deterioration that threatens the entity's survival, or a decision to liquidate or cease trading, ends the going concern basis.
Treating a going concern failure after year end as an ordinary adjusting or non-adjusting event.
Students try to fit every post year end event into one of the two usual categories.
Fix: IAS 10 says the effect is so pervasive that it requires a fundamental change in the basis of accounting (IAS 10.14-16). You change the basis of preparation, not just adjust amounts or add a note.
Adjusting retained earnings for a disclosed dividend.
Students mix up disclosure with recognition.
Fix: Disclosure means a note only. The primary statements stay unchanged.

Worked examples

Example 1

Year end is 31 December 20X5. The financial statements are authorised on 20 March 20X6. On 15 February 20X6 the directors declared a final dividend of $500,000 to ordinary shareholders. How should it be treated in the 20X5 statements?

Show the solution

The event falls between the reporting date and authorisation date.
The dividend was declared on 15 February 20X6, after the reporting date.
No obligation existed at 31 December 20X5, so no liability is recognised.
Retained earnings are not reduced in 20X5.

Answer: Do not recognise a liability. Disclose the $500,000 dividend in the notes as a non-adjusting event.

Example 2

Year end is 30 June 20X6. On 10 August 20X6, before the statements are authorised, the directors decide to cease trading and liquidate the entity because its operations have collapsed. Can the statements be prepared on a going concern basis?

Show the solution

The decision was made after the reporting date but before authorisation.
A decision to liquidate or cease trading means the entity is no longer a going concern.
IAS 10 does not treat this as a normal adjusting or non-adjusting event. The effect is so pervasive that it requires a fundamental change in the basis of accounting (IAS 10.14-16).
The statements must therefore not be prepared on a going concern basis.

Answer: No. Prepare the statements on an alternative basis and disclose that they are not prepared on a going concern basis, together with the basis used.

Exam tips

Write the declaration date next to the reporting date before choosing an answer.
In multiple-response questions, select the stated number of options and watch for one wrongly including a liability for a post year end dividend.
Remember the going concern exception. It is the one post year end deterioration that is not just adjusting or non-adjusting, because it changes the basis of preparation.
In number entry questions on retained earnings, do not deduct a dividend declared after year end.
Read whether the question asks for the treatment or the disclosure. They can differ.

Practice questions from Events after the reporting period

Dividends Declared and Going Concern After Year End in other exams

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

Dividends Declared and Going Concern After Year End: frequently asked questions

Why is a dividend declared after year end not a liability?

A liability requires a present obligation at the reporting date. Before declaration, the entity can still choose not to pay. So nothing is owed at year end and the dividend is only disclosed.

Is a proposed final dividend in the annual report recognised?

Not if it was declared or approved after the reporting date. It is disclosed in the notes. It is recognised in the period in which it is declared.

What happens if going concern fails after year end?

The effect is so pervasive that IAS 10 requires a fundamental change in the basis of accounting. The financial statements must not be prepared on a going concern basis. You use another appropriate basis and disclose that fact and the basis used.

Does any poor trading after year end end the going concern basis?

No. Only deterioration serious enough to remove the going concern assumption requires a change of basis. Other worsening is judged under the usual adjusting and non-adjusting rules.