Financial Reporting · Reporting financial performance

IAS 10 Adjusting and Non-Adjusting Events Explained

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 at the reporting date, so you change the figures. Non-adjusting events concern conditions arising after the reporting date, so you only disclose them if material.

Understand IAS 10 Events After the Reporting Period

Financial statements are prepared as at a reporting date, but they are signed off weeks or months later. Things happen in that gap. IAS 10 tells you which of those things change the numbers and which do not.

The reporting period ends at the reporting date. Events after the reporting period are favourable or unfavourable events that occur between the reporting date and the date the financial statements are authorised for issue. Always check the authorisation date in the question. An event after that date is outside IAS 10.

The test is simple: did the condition exist at the reporting date? If the event gives further evidence of a condition that existed at the reporting date, it is adjusting. You change the amounts recognised. If it reflects a condition that arose after the reporting date, it is non-adjusting. You do not change the amounts. You disclose the nature of the event and an estimate of its financial effect (or a statement that it cannot be estimated) if it is material.

Typical adjusting events: a customer is declared insolvent after the year end, and the receivable at the year end was outstanding (the loss confirms the receivable was impaired); a court case settled after the year end confirms an obligation that existed at the year end; inventory sold after the year end for less than cost shows net realisable value was lower; discovery of fraud or errors showing the statements were incorrect.

Typical non-adjusting events: a fire destroys a factory after the year end; a major acquisition or business combination; a share issue; large changes in asset prices or exchange rates after the year end; announcing a restructuring after the year end. Dividends declared after the reporting period are also non-adjusting: no liability exists at the reporting date, so you do not recognise one. Also, if the going concern basis is no longer appropriate because of events after the reporting date, that is a special case: the financial statements must not be prepared on a going concern basis.

Key rules to remember

Adjusting event: Evidence of a condition existing at the reporting date → adjust the amounts recognised; Examples: customer insolvency confirming a year-end receivable loss, a court case settlement confirming a year-end obligation, inventory NRV evidence, fraud or errors found.
Non-adjusting event: Condition arising after the reporting date → no adjustment; disclose if material; Disclose the nature of the event and an estimate of its financial effect, or state that an estimate cannot be made.
Dividends: Dividends declared after the reporting period are not recognised as a liability at the reporting date; Disclose them in the notes if material. A dividend declared before the year end is a liability at the year end.
Going concern: If management decides after the reporting date to liquidate or cease trading → not a going concern basis; This overrides the adjusting/non-adjusting test. It affects the whole basis of preparation.
Time window: Reporting date → date financial statements are authorised for issue; Events after the authorisation date are not covered by IAS 10.

How to solve IAS 10 Events After the Reporting Period questions

Use the same sequence for every IAS 10 question, whether it is an objective test or a written part of a constructed response.

1Find the reporting date and the date the financial statements were authorised for issue.
2Check the event date falls between them. If it falls after authorisation, IAS 10 does not apply.
3Ask: did the condition exist at the reporting date? If the event confirms or gives more evidence of it, it is adjusting.
4If the condition arose after the reporting date, it is non-adjusting.
5For an adjusting event, work out the correction: usually an extra expense, a reduced asset, or a new or changed provision. Post it to the year-end figures.
6For a non-adjusting event, make no change. Decide if it is material and, if so, state the note disclosure: nature and estimated financial effect.
7For dividends, check the declaration date against the reporting date before touching the figures.
8Check for a going concern problem, and finish by restating the key totals such as profit and net assets.

Quickest way: Condition at the year end test

When to use it: Use this in Section A and Section B objective questions where you must classify an event quickly.

Ask only: was the problem already there at the year end?
If yes, it is adjusting. Typical words: 'customer went insolvent', 'court case settled', 'inventory sold below cost', 'error discovered'.
If the event itself happened after year end (fire, flood, takeover, share issue, exchange rate fall), it is non-adjusting.
Any dividend declared after the year end is non-adjusting, so no liability.
Check the date. If it is after authorisation, ignore IAS 10 and choose the answer that says so.

Common mistakes in IAS 10 Events After the Reporting Period

Recognising a dividend declared after the year end as a liability
It feels like the profit belongs to the period just ended, so students accrue it.
Fix: A liability only exists if the dividend is declared on or before the reporting date. Declared afterwards means disclosure only, if material.
Treating every bad event as adjusting
Students focus on the loss rather than on when the underlying condition arose.
Fix: Ask whether the condition existed at the year end. A fire after year end is non-adjusting, even though the loss is large.
Treating customer insolvency as non-adjusting
The insolvency occurred after the year end, so students think the event is new.
Fix: Insolvency after the year end normally confirms the receivable was already impaired at the year end, so it is adjusting. Write off or provide against the balance.
Ignoring the authorisation date
Students assume any event after the year end counts.
Fix: Underline both dates in the question. Events after authorisation fall outside IAS 10.
Forgetting the disclosure for material non-adjusting events
Students focus on the numbers and conclude 'no adjustment' as the whole answer.
Fix: Always add that the nature of the event and an estimate of its financial effect should be disclosed if material.
Adjusting for a non-adjusting event just because it is material
Students link materiality to adjustment.
Fix: Materiality only decides whether you disclose a non-adjusting event. It never turns it into an adjusting event.

Worked examples

Example 1

Pegasus Co has a reporting date of 31 December 20X4. The financial statements were authorised for issue on 15 March 20X5. Trade receivables include ₹4,00,000 owed by Orion Ltd. On 20 February 20X5 Orion went into liquidation and Pegasus expects to receive nothing. On 5 March 20X5 a fire destroyed a warehouse with a carrying amount of ₹12,00,000 (uninsured). Explain the treatment of each event.

Show the solution

Dates: both events fall between 31 December 20X4 and 15 March 20X5, so IAS 10 applies.
Orion: the debt was outstanding at the year end. The liquidation gives evidence that the receivable was already impaired at that date. This is an adjusting event.
Adjustment: write off ₹4,00,000 as an irrecoverable debt expense (Dr irrecoverable debts expense ₹4,00,000, Cr trade receivables ₹4,00,000). Profit and net assets fall by ₹4,00,000.
Fire: the warehouse existed and was intact at the year end. The fire is a condition arising after the reporting date. This is a non-adjusting event.
No change is made to the warehouse carrying amount at 31 December 20X4.
Because ₹12,00,000 is likely to be material, disclose in the notes the nature of the fire and an estimate of its financial effect, ₹12,00,000 before any recoveries.

Answer: Orion liquidation: adjusting, reduce receivables and profit by ₹4,00,000. Fire: non-adjusting, no adjustment, disclose nature and estimated effect of ₹12,00,000.

Example 2

Delta Ltd has a year end of 30 June 20X6 and authorised its financial statements on 10 September 20X6. Profit before tax before considering the items below is ₹50,00,000. (1) On 20 July 20X6 the directors declared a final dividend of ₹8,00,000 for the year ended 30 June 20X6. (2) On 5 August 20X6 a court ruled against Delta in a case started in May 20X6 over a faulty product sold in April 20X6; damages are ₹6,00,000. No provision had been made, although at 30 June a loss was probable and the amount was reliably estimable at ₹6,00,000. Ignore tax. Calculate the adjusted profit and state the treatment of the dividend.

Show the solution

Dates: both events fall between 30 June 20X6 and 10 September 20X6, so IAS 10 applies.
Dividend: declared on 20 July 20X6, after the reporting date. No obligation existed at 30 June. It is non-adjusting. Do not accrue ₹8,00,000. Disclose it in the notes if material.
Court case: the claim arose from a sale in April and the case started in May, so the obligation existed at 30 June. The ruling confirms it. This is adjusting.
Provide ₹6,00,000 at 30 June 20X6 (Dr expense ₹6,00,000, Cr provision or liability ₹6,00,000).
Adjusted profit before tax = ₹50,00,000 − ₹6,00,000 = ₹44,00,000.
The dividend does not affect profit in any case, because dividends are a distribution of profit, not an expense.

Answer: Adjusted profit before tax is ₹44,00,000. The ₹8,00,000 dividend is not recognised as a liability at 30 June 20X6 and is disclosed as a non-adjusting event if material.

Exam tips

In objective questions the date trap is common. Check the authorisation date before classifying anything.
Learn a short list of adjusting examples: insolvent customer, court case settlement, NRV evidence of inventory, errors or fraud. Everything else, such as fire, acquisition, share issue or exchange rate change, is usually non-adjusting.
For written parts, give three things: classification, reason (condition at the year end), and treatment (adjust or disclose). This earns the marks.
If a question asks for revised profit or net assets, show the adjustment line by line and state the new total clearly.
Dividends are tested often. Declared after the year end means no liability and no adjustment.

Practice questions from Reporting financial performance

IAS 10 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.

IAS 10 Events After the Reporting Period: frequently asked questions

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

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

Are dividends declared after the year end adjusting events?

No. They are non-adjusting, because no obligation exists at the reporting date. You do not recognise a liability. You disclose the dividend in the notes if it is material.

Which date ends the IAS 10 period?

The period runs from the reporting date to the date the financial statements are authorised for issue. Events after the authorisation date are outside IAS 10.

Can a non-adjusting event ever change the financial statements?

Not the recognised amounts. The exception is an event showing the entity is no longer a going concern, such as a decision to liquidate. Then the statements cannot be prepared on a going concern basis.