Audit and Assurance · Subsequent events

Subsequent Events under IAS 10: Adjusting and Non-Adjusting Events

Updated 11 October 2026 · Fact-checked

IAS 10 covers events between the reporting date and the date the financial statements are authorised for issue. Adjusting events give evidence of conditions that existed at the reporting date, so you change the figures. Non-adjusting events arise after that date, so you only disclose them if material.

Understand Subsequent Events under IAS 10

The financial statements are not finished on the reporting date. Directors take weeks or months to prepare and approve them. During that gap, things happen. IAS 10 tells you what to do with them.

Events after the reporting period are favourable and unfavourable events that occur between the end of the reporting period and the date the financial statements are authorised for issue. Both good and bad news count. The authorisation date is normally when the board approves the statements, not when the shareholders meet.

The test is simple. Ask: did the event give more information about a condition that already existed at the year end? If yes, it is an adjusting event. You change the amounts in the financial statements. If the condition arose after the year end, it is a non-adjusting event. You do not change the amounts. You disclose it in the notes if it is material enough to affect users' decisions.

There is one major exception. If events after the period show the business is no longer a going concern, the statements must not be prepared on a going concern basis. This applies even if the event happens after the year end. It is neither adjusting nor non-adjusting in the usual sense. It changes the whole basis of preparation.

For audit, this matters because the auditor must check that these events have been identified and treated correctly. ISA 560 deals with the auditor's duties. This page focuses on the accounting rule you need to apply.

Key rules to remember

Period covered: Reporting date → date financial statements are authorised for issue; Events outside this window are not IAS 10 events. Events after authorisation are handled differently.
Adjusting event: Evidence of conditions existing at the reporting date → adjust recognised amounts; Examples: customer insolvency confirming a receivable was impaired, court case settled for a different amount than provided.
Non-adjusting event: Condition arose after the reporting date → no adjustment; disclose if material; Disclose the nature of the event and an estimate of its financial effect, or a statement that no estimate can be made.
Dividends: Dividends on equity shares declared after the reporting date → not a liability at the reporting date; Disclose in the notes. Do not accrue.
Going concern exception: Management decides to liquidate or cease trading after the period → do not use going concern basis; Applies even if the event occurs after the year end.

How to solve Subsequent Events under IAS 10 questions

Use this method for any scenario asking how an event after the year end should be treated, or what the auditor should do.

1Fix the dates. Note the reporting date and the date the financial statements are authorised for issue. Check the event falls between them.
2Identify what the event is and what it tells you.
3Ask whether the underlying condition existed at the reporting date. If the event only confirms or updates it, it is adjusting.
4If the condition arose after the year end, classify the event as non-adjusting.
5State the treatment. For adjusting events, change the amounts recognised. For non-adjusting events, disclose the nature and estimated financial effect if material.
6Check materiality. A small event needs no change or disclosure.
7Check for going concern implications. If the event threatens the business's survival, say so.
8If the question is from an audit viewpoint, add the procedures: review post year end events, read minutes, enquire of management and consider a written representation.

Quickest way: The one-question test

When to use it: Use this in Section A and B objective test questions, where you have about two minutes per question.

Find the date the event occurred and the reporting date.
Ask: was the problem already there at the year end?
If yes, pick adjusting. If the event itself created the situation, pick non-adjusting.
Check whether the question asks for treatment or classification, and answer only that.
If the event destroys the business, think going concern before anything else.

Common mistakes in Subsequent Events under IAS 10

Treating every post year end event as adjusting because it is bad news.
Students link bad news with an adjustment, rather than asking when the condition arose.
Fix: Ignore whether the news is good or bad. Ask only whether the condition existed at the reporting date.
Adjusting for a fall in the market value of investments after the year end.
It looks like a loss that should be recognised.
Fix: A fall in market value after the period reflects conditions arising after it. It is non-adjusting. Disclose if material.
Accruing a dividend declared after the year end.
Students think a declared dividend is always a liability.
Fix: At the reporting date there was no obligation. Disclose it in the notes only.
Forgetting the going concern exception.
Students apply the adjusting/non-adjusting split to everything.
Fix: If post year end events show the entity will cease trading, the going concern basis is no longer appropriate, even though the event is after the year end.
Using the wrong end date for the window.
Students use the audit report date or the AGM date.
Fix: IAS 10 uses the date the financial statements are authorised for issue, normally board approval.
Saying non-adjusting events need no action at all.
Students remember 'do not adjust' and stop.
Fix: Add the disclosure: the nature of the event and an estimate of its financial effect, if material.

Worked examples

Example 1

A company has a year end of 31 December 20X5. The financial statements were authorised on 15 March 20X6. At 31 December 20X5, receivables included $80,000 owed by a customer. On 20 February 20X6, the customer went into liquidation and the company expects to recover nothing. Also, on 5 March 20X6, a fire destroyed a warehouse. Explain the treatment of both events.

Show the solution

Both events fall between 31 December 20X5 and 15 March 20X6, so they are within IAS 10.
Customer liquidation: the customer was in financial difficulty at the year end, and the liquidation confirms the receivable was impaired at that date. This is an adjusting event.
Treatment: write off the $80,000 receivable in the 20X5 financial statements, recognising the loss in profit or loss.
Fire: it occurred on 5 March 20X6, so the condition did not exist at the reporting date. This is a non-adjusting event.
Treatment: do not change the 20X5 figures. Disclose the nature of the fire and an estimate of its financial effect, if material, noting any insurance recovery.

Answer: The liquidation is adjusting, so write off $80,000. The fire is non-adjusting, so disclose it if material and do not adjust the amounts.

Example 2

At 31 March 20X6, a company provided $50,000 for a legal claim. On 10 May 20X6 the court awarded damages of $65,000 against the company. The financial statements were authorised on 20 June 20X6. Also on 1 June 20X6 the board declared a dividend of $30,000 on equity shares. Explain the treatment of both items and the required adjustment.

Show the solution

Both events are before the authorisation date of 20 June 20X6, so IAS 10 applies.
Court award: the claim existed at the year end and the court ruling provides evidence of the final amount. This is an adjusting event.
Adjustment: increase the provision from $50,000 to $65,000. The extra charge is $65,000 − $50,000 = $15,000, recognised in profit or loss for the year to 31 March 20X6.
Dividend: declared on 1 June 20X6, after the reporting date, so there was no obligation at 31 March 20X6. This is a non-adjusting event.
Treatment: do not recognise a liability. Disclose the $30,000 dividend in the notes.

Answer: Increase the provision by $15,000 to $65,000 as an adjusting event. The $30,000 dividend is non-adjusting and is disclosed only.

Exam tips

Always write the two dates in your answer. Markers reward you for showing the event falls within the IAS 10 window.
Give the reason for your classification in one sentence. The reason earns the mark, not just the label.
For non-adjusting events, state the disclosure: nature of the event and estimated financial effect. Do not stop at 'do not adjust'.
In audit scenarios, link the event to the auditor's action: ask management, read board minutes, review post year end results, and consider the effect on the audit opinion if it is not dealt with properly.
Watch for going concern clues such as loss of a major customer, bank withdrawing facilities or a decision to wind up.

Subsequent Events under IAS 10 in other exams

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

Subsequent Events under IAS 10: frequently asked questions

What is the difference between adjusting and non-adjusting events?

An adjusting event gives evidence of a condition that existed at the reporting date, so you change the financial statements. A non-adjusting event relates to a condition that arose after the reporting date, so you only disclose it if it is material.

What are examples of adjusting and non-adjusting events?

Adjusting examples include a customer insolvency that confirms an impaired receivable, a court case settled for a different amount than provided, and discovery of fraud or errors. Non-adjusting examples include a fire after the year end, a major acquisition, and a fall in the market value of investments.

Do I accrue a dividend declared after the year end?

No. An equity dividend declared after the reporting period is not a liability at the reporting date. You disclose it in the notes.

Which date ends the IAS 10 period?

The period ends on the date the financial statements are authorised for issue. This is normally when the board approves them, not the audit report date or the shareholders' meeting.