Objective
Sets out when financial statements should be adjusted for events after the reporting date, and what to disclose about the date of authorisation and such events.
Scope
- Events, favourable and unfavourable, between the end of the reporting period and the date the financial statements are authorised for issue.
Key definitions
- Adjusting events
- Events that give evidence of conditions that existed at the end of the reporting period.
- Non-adjusting events
- Events that are indicative of conditions that arose after the reporting period.
- Date of authorisation
- The date the financial statements are authorised for issue (e.g. by the board). Events after this date are outside IAS 10.
Recognition & measurement
Recognition
- Adjust the amounts recognised for adjusting events.
- Do not adjust for non-adjusting events; disclose material ones.
- Dividends declared after the reporting period are not a liability at the reporting date; disclose them in the notes.
- If management decides after the year end to liquidate or stop trading, or has no realistic alternative, the going concern basis must not be used.
Typical adjusting events
- Settlement of a court case confirming a present obligation at the reporting date.
- Customer bankruptcy confirming a receivable was impaired at the year end.
- Sale of inventory after the year end giving evidence of NRV at the year end.
- Determining the cost of assets bought, or proceeds of assets sold, before the year end.
- Discovery of fraud or errors showing the financial statements are incorrect.
Typical non-adjusting events
- A fall in the market value of investments after the year end.
- Destruction of a plant by fire after the year end.
- Major business combinations, disposals, share issues or announced restructurings after the year end.
- Changes in tax rates or laws enacted or announced after the reporting period.
Key disclosures
- Date the financial statements were authorised for issue and who authorised them (and whether owners can amend them).
- For each material non-adjusting event: its nature and an estimate of its financial effect, or a statement that no estimate can be made.
- Update disclosures about conditions at the reporting date for new information received.
Common exam traps
- The key question is when the condition arose, not when you found out about it.
- A fire after the year end is non-adjusting, but if it is so severe that the entity is no longer a going concern, the whole basis of preparation changes.
- Dividends declared after the year end are never recognised as liabilities at the year end.
Practise MCQs on this standard
Test your understanding of IAS 10 with free chapter-wise MCQs and explanations in these question banks.
CAF-1 Financial Accounting and ReportingICAP CAFACCA FA Financial AccountingACCAACCA FR Financial ReportingACCACAF-6 Corporate ReportingICAP CAFCIMA BA3 Fundamentals of Financial AccountingCIMA Certificate in Business AccountingICAEW AF Accounting FundamentalsICAEW ACA Certificate LevelCA Inter P1 Advanced AccountingICAI CA Intermediate
ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.