Advanced Accounting · AS 4 Contingencies and Events occurring after the Balance Sheet Date

Events Occurring After the Balance Sheet Date (AS 4)

Updated 4 October 2026 · Fact-checked

Events after the balance sheet date are significant events, favourable or unfavourable, between the balance sheet date and the date the financial statements are approved. Adjusting events give evidence of conditions existing at the balance sheet date, so you change the figures. Non-adjusting events arose later, so you only disclose them.

Understand Events Occurring After the Balance Sheet Date

A balance sheet shows the position on one date, say 31 March. But the accounts are approved weeks later. In that gap, things happen. AS 4 asks one question about each: did the event confirm something that was already true on the balance sheet date, or did it create something new after that date?

The period that matters runs from the balance sheet date to the date the financial statements are approved by the board of directors (for a company) or the corresponding authority (for other enterprises). Both favourable and unfavourable events count, but only significant ones.

An adjusting event provides further evidence of conditions that existed at the balance sheet date. You change the amounts of assets and liabilities. Example: a customer is declared insolvent in April. His poor condition existed in March, so you write off or provide for the debt in the March accounts.

A non-adjusting event indicates conditions that arose after the balance sheet date. The March position was fine, so you do not change the figures. Example: a fire destroys a plant in May. You disclose the nature of the event and an estimate of its financial effect, or state that no estimate can be made. This is needed when non-disclosure would affect users' decisions.

Two special cases are asked often. Dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date; you disclose them in the notes. The dividend is recognised in the year in which it is declared or approved. And if an event shows that the going concern assumption is no longer appropriate, you adjust the financial statements even though the event came after the balance sheet date.

Key rules to remember

Period covered: Balance sheet date → date of approval of financial statements; Only events in this window are treated under AS 4. Events after approval are outside it.
Adjusting event rule: Evidence of condition existing at balance sheet date → adjust assets and liabilities; Illustrative examples: customer insolvency confirming a doubtful debt, court settlement of a case based on a past event, sale of inventory after year end showing NRV, discovery of fraud or error.
Non-adjusting event rule: Condition arose after balance sheet date → no adjustment, disclose nature and estimate of financial effect; If the effect cannot be estimated, state that fact. These are illustrative examples, not a fixed list: fire after year end, new share issue, major purchase of assets, announcement of a restructuring plan. Always apply the cause test. An amalgamation after year end is handled through disclosure (with AS 14 for the amalgamation itself), not by a fixed rule here.
Dividend after balance sheet date: Dividend proposed or declared after balance sheet date → no liability at balance sheet date → disclose in notes; Do not show a provision or liability for it in the year-end balance sheet. It is recognised in the year in which it is declared or approved.
Going concern override: Event shows going concern no longer appropriate → adjust financial statements even if event is after balance sheet date; Signs: serious deterioration in results and financial position, or intention to liquidate or stop trading. Disclose the changed basis as required by AS 1.

How to solve Events Occurring After the Balance Sheet Date questions

Use the same short test for every event in the question. It works for classification, journal and disclosure questions alike.

1List each event with its date. Check that it falls between the balance sheet date and the date of approval of the accounts. Ignore events outside this window.
2Ask: did the event happen because of a condition that already existed on the balance sheet date? If yes, it is an adjusting event. If the cause arose later, it is non-adjusting.
3For an adjusting event, work out the changed amount (extra provision, write-off, write-down to NRV) and pass the adjustment or recompute profit and the asset or liability.
4For a non-adjusting event, leave the figures unchanged. Write the disclosure: nature of the event and estimate of financial effect, or a statement that it cannot be estimated.
5For any dividend, check the date. If proposed or declared after the balance sheet date, do not provide for it. Disclose it in the notes. It is recognised in the year of declaration or approval.
6Check going concern. If the event shows the enterprise cannot continue, adjust the whole basis of preparation and disclose it.
7Give the reason in one line for each classification, then show the revised figure or the disclosure note.

Quickest way: Cause-date test

When to use it: Use it for MCQs and for 'classify the following events' written questions when time is short.

Underline the cause of the event, not the date of the event. A May settlement of a February accident has a February cause, so it is adjusting.
Cause before year end: adjusting. Cause after year end: non-adjusting.
Spot the usual patterns, which are examples and not a fixed list. Customer insolvency, court case settled, sale of stock below cost, fraud or error found: usually adjusting. Fire, flood, new issue of shares, fall in market value of investments, major purchase of assets: usually non-adjusting. An amalgamation after year end is disclosed, not adjusted.
Dividend after year end: note only, no liability. Going concern failure: adjust everything.
Written format for step marks: Event, Type (adjusting or non-adjusting), Reason, Treatment (amount adjusted or wording of note). Write one line each.

Common mistakes in Events Occurring After the Balance Sheet Date

Treating every unfavourable event as adjusting because it looks like a loss.
Students judge the event by its size or bad news instead of its cause.
Fix: Ask only whether the condition existed at the balance sheet date. A fire in May is a big loss but is non-adjusting.
Providing for a dividend proposed after the balance sheet date as a liability in the year-end accounts.
Older textbooks and habit from earlier years treated proposed dividend as a provision.
Fix: No obligation existed at the balance sheet date. Do not provide. Disclose the amount in the notes. Recognise it in the year it is declared or approved.
Adjusting the figures for a non-adjusting event and not disclosing it.
Students think 'significant event means change the numbers'.
Fix: Leave the figures alone. Disclose the nature of the event and the estimate of its financial effect, or say it cannot be estimated.
Considering events after the date of approval of the financial statements.
Questions list many later events, and students include them all.
Fix: Check the approval date. AS 4 covers only events up to that date.
Ignoring the going concern override and treating a liquidation decision as just a disclosure.
Students apply the non-adjusting rule mechanically because the decision was taken after year end.
Fix: If the event shows the going concern assumption is no longer appropriate, adjust the accounts even though the event is after the balance sheet date, and disclose the basis used.
Adjusting for the full settlement amount instead of only the extra amount over the existing provision.
Students forget that part of the liability was already provided.
Fix: Adjustment = settlement amount minus provision already made. Show this subtraction in the working.

Worked examples

Example 1

A company's year ends 31 March 2027. Its board approved the financial statements on 20 May 2027. Classify the following and state the treatment. (a) On 10 April 2027 a customer owing ₹8,00,000 was declared insolvent; his financial condition had been worsening through March and no provision was made. (b) On 5 May 2027 a fire destroyed a warehouse with a loss of ₹15,00,000. (c) On 12 May 2027 the board proposed a dividend of ₹2 per share on 10,00,000 equity shares.

Show the solution

All three events fall between 31 March 2027 and 20 May 2027, so AS 4 applies to each.
(a) The customer's weak condition existed at 31 March. His insolvency gives further evidence of it. This is an adjusting event. Provide for or write off the ₹8,00,000 debt in the 2026-27 accounts, reducing profit and trade receivables by ₹8,00,000, to the extent it is not recoverable.
(b) The fire happened after the balance sheet date, so the cause arose later. This is a non-adjusting event. Do not change the figures. Disclose in the notes the nature of the event (fire at the warehouse) and the estimated financial effect of ₹15,00,000, less any insurance recovery if estimable.
(c) The dividend was proposed after the balance sheet date. No liability existed at 31 March 2027. Dividend amount = 10,00,000 × ₹2 = ₹20,00,000. Do not provide for it. Disclose it in the notes. It is recognised in the year it is declared or approved.

Answer: (a) Adjusting: provide for ₹8,00,000. (b) Non-adjusting: disclose the fire and ₹15,00,000 effect. (c) No liability; disclose the proposed dividend of ₹20,00,000 in the notes.

Example 2

Profit before considering the following items is ₹40,00,000 for the year ended 31 March 2027. Accounts were approved on 30 June 2027. (i) Inventory costing ₹12,00,000 was damaged in March 2027 and included at cost. It was sold on 15 April 2027 for a net ₹9,50,000 after selling expenses. (ii) A claim arose from an accident in February 2027 and a provision of ₹2,00,000 was made. The case was settled on 25 April 2027 for ₹3,00,000. Compute the revised profit.

Show the solution

(i) The damage occurred in March, so the April sale gives evidence of net realisable value at the balance sheet date. This is an adjusting event. Inventory should be at the lower of cost and NRV: 12,00,000 − 9,50,000 = ₹2,50,000 write-down.
(ii) The accident was in February, so the obligation existed at the balance sheet date. The settlement is an adjusting event. Extra provision = 3,00,000 − 2,00,000 = ₹1,00,000.
Total adjustment = 2,50,000 + 1,00,000 = ₹3,50,000.
Revised profit = 40,00,000 − 3,50,000 = ₹36,50,000.

Answer: Revised profit is ₹36,50,000. Inventory is shown at ₹9,50,000 and the litigation provision is ₹3,00,000.

Exam tips

In classification questions, write the type, a one-line reason based on the cause, and the treatment. Examiners give marks for each of these.
Always check the approval date in the question. A planted event after approval is a common trap.
For MCQs, memorise the standard examples: insolvency of debtor, court settlement, NRV evidence and fraud or error are adjusting; fire and new share issue are non-adjusting. Treat them as examples and still apply the cause test.
For dividend questions, state clearly that no liability is recognised at the balance sheet date and the dividend is disclosed in the notes. Do not pass a provision entry.
In numerical questions, show the adjustment as a separate line (inventory write-down, additional provision) and then the revised profit.

Practice questions from AS 4 Contingencies and Events occurring after the Balance Sheet Date

Events Occurring After the Balance Sheet Date in other exams

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

Events Occurring After the Balance Sheet Date: 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 balance sheet date, so you change the amounts in the financial statements. A non-adjusting event relates to a condition that arose after the balance sheet date, so you only disclose it if it is significant.

How is a dividend declared after the balance sheet date treated under AS 4?

It is not recognised as a liability at the balance sheet date because no obligation existed then. You disclose the proposed or declared dividend in the notes, and it is recognised in the year it is declared or approved.

What happens if an event after the balance sheet date affects going concern?

If the event shows that the going concern assumption is no longer appropriate, you adjust the financial statements even though the event occurred after the balance sheet date. Examples are a serious deterioration in results or a decision to liquidate.

What should be disclosed for a non-adjusting event?

Disclose the nature of the event and an estimate of its financial effect. If the effect cannot be estimated, state that fact. Disclosure is needed when leaving it out would affect the decisions of users of the accounts.