CA Final · Financial Reporting

Ind AS 10 Events after the Reporting Period for CA Final

Ind AS 10 tells you how to treat events between the end of the reporting period 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 amounts. Non-adjusting events arose later, so you only disclose them if material.

What this chapter covers

Ind AS 10 deals with one question: what do you do with events that happen after the balance sheet date but before the financial statements are authorised for issue? Some events show you a better picture of what was already true at the reporting date. Others reflect new conditions. The standard gives a clear test to separate the two, and each type has its own treatment.

The chapter is short, but the logic is precise. You must know the two dates that bound the period: the end of the reporting period and the date of authorisation for issue. You must also know three special areas: dividends declared after the reporting period, going concern, and the disclosure requirements for non-adjusting events.

This chapter connects to many other parts of the paper. Ind AS 37 (provisions and contingencies), Ind AS 2 (inventories and net realisable value), Ind AS 12 (taxes), Ind AS 115 (revenue), Ind AS 1 (going concern and presentation) and Ind AS 113 (fair value) all feed into it. Case scenarios often hide an Ind AS 10 test inside a question on another standard.

Ind AS 10 is compact, so it is a good return on effort. Case-scenario MCQs can test the adjusting versus non-adjusting call in a few lines, and written questions often add a post-balance-sheet event to a larger problem on provisions, inventory, receivables or consolidation. If your classification is right, the numbers and the disclosure follow. If it is wrong, you lose marks on both. The rules are few, so you can master them quickly and keep the marks safe.

Ind AS 10 Events after the Reporting Period: topics in the order to study them

1Ind AS 10 Scope, Definitions and Events after Reporting PeriodStart here because every later rule depends on the two dates, the definition of an event, and the time window it covers.
2Adjusting Events after the Reporting PeriodStudy this next because these events change recognised amounts, so they need the most working and the most practice.
3Non-adjusting Events and DisclosuresLearn this after adjusting events so you can contrast the two sets and know what to disclose instead of adjust.
4Dividends and Going Concern after the Reporting PeriodFinish with these special cases, since they use the earlier ideas but have their own rules and exam traps.

How to prepare Ind AS 10 Events after the Reporting Period

Treat this chapter as a classification exercise first and an accounting exercise second. Your aim is to decide quickly, with a reason, and then apply the right treatment.

Fix the timeline in your mind: end of the reporting period, then the date the financial statements are authorised for issue. Draw it on one page and mark which events fall inside the window.
Learn the one test that decides everything: did the event give evidence of a condition that existed at the end of the reporting period? If yes, it is adjusting. If the condition arose after, it is non-adjusting.
Write your own short list of typical adjusting examples (such as settlement of a court case, bankruptcy of a debtor, sale of inventory after the reporting period that provides evidence of its net realisable value at the reporting date, discovery of fraud or errors that show the financial statements are incorrect) and typical non-adjusting examples (such as a fall in fair value of investments after the date, or a major business combination). Then explain the reason for each in one line.
Practise short case scenarios. For each one, write the date, the classification, the reason, the accounting entry or the disclosure, in that order. This is also the shape of a written answer.
Study dividends and going concern separately. Remember that dividends declared after the reporting period are not recognised as a liability at that date. Also remember that a decision to liquidate or cease trading, or a deterioration in operating results and financial position after the reporting period, may show that the going concern assumption is no longer appropriate. If so, the whole basis of preparation changes.
Link the chapter to Ind AS 37, Ind AS 2 and Ind AS 12 (or Ind AS 115) questions inside bigger problems. Re-do two or three integrated questions where the post-balance-sheet event is only one part.
Before the exam, close the book and recite the definitions, the test, the examples and the disclosure points from memory.

Common mistakes in Ind AS 10 Events after the Reporting Period

Classifying by the type of event instead of by when the condition arose.
Fix: Always apply the test: did the condition exist at the reporting date? Litigation that began after the reporting date from a later cause is not adjusting.
Recognising a dividend declared after the reporting period as a liability in the balance sheet.
Fix: Do not recognise it as a liability at that date. Disclose it in the notes.
Adjusting for a non-adjusting event such as a fall in market value of investments after the reporting date.
Fix: Ask whether the fall reflects conditions at the reporting date. If it arose from later market movement, only disclose it if material.
Forgetting disclosure when the answer is non-adjusting.
Fix: Always add the disclosure: the nature of the event and the estimated financial effect, or a statement that an estimate cannot be made.
Using the wrong end date for the window, such as the date of the audit report or the AGM.
Fix: Take the end date from the facts given in the question and state it in your answer. Look for the date the financial statements were authorised for issue.
Ignoring the going concern effect of a post-period event.
Fix: Check whether the event, including a deterioration in operating results and financial position after the reporting period, shows that the going concern assumption is no longer appropriate. If so, the basis of preparation changes and this affects the whole set of statements.

Last-day revision: Ind AS 10 Events after the Reporting Period

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.

Ind AS 10 Events after the Reporting Period practice questions

Ind AS 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.

Ind AS 10 Events after the Reporting Period: frequently asked questions

What is the difference between adjusting and non-adjusting events in Ind AS 10?

An adjusting event gives evidence of a condition that existed at the end of the reporting period, so you change the recognised amounts. A non-adjusting event relates to a condition that arose after that date, so you do not change the amounts. You disclose material non-adjusting events.

Is a dividend declared after the reporting period a liability?

No. If dividends on equity instruments are declared after the reporting period, you do not recognise a liability at the end of the reporting period because no obligation existed then. You disclose the dividend in the notes.

Which date ends the period covered by Ind AS 10?

The period runs from the end of the reporting period to the date the financial statements are authorised for issue. In a case scenario, use the authorisation date given in the facts. Do not substitute another date such as the AGM date unless the question says so.

What happens if going concern fails after the reporting period?

If management decides after the reporting period to liquidate the entity or cease trading, or has no realistic alternative, the entity does not prepare its financial statements 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, and then the basis of preparation must change. This applies even if the entity was profitable during the period.

How should I answer an Ind AS 10 case question in the exam?

State the event and its date, classify it with the reason, give the accounting treatment or the disclosure, and then conclude. Keep it in that order. This shows the examiner your logic and secures marks even if one number is off.