Classify events after the reporting period under IAS 10
Decide whether later evidence adjusts year-end amounts or instead requires note disclosure as a material non-adjusting event.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover the nine named IAS at the main-provisions level described in Cambridge teacher guidance, the stated ethical principles, audit and stewardship. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use the Topic 1.5 and 3.1 statement skills: identify the reporting period, distinguish profit from cash, and explain how a reporting choice affects users of financial statements.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A flood destroys a warehouse two months after year end. The warehouse was undamaged at year end. What type of event is this?
What you will learn
- Define the period covered by IAS 10
- Distinguish adjusting and non-adjusting events
- Explain why material non-adjusting events are disclosed
The timing window ends when statements are authorised
IAS 10 covers favourable and unfavourable events between the reporting-period end and the date the financial statements are authorised for issue. The key question is whether the event provides evidence about a condition that already existed at the reporting date, or points to a condition that arose later.
An adjusting event supplies further evidence of a year-end condition. If material, the figures are adjusted. Examples include a customer becoming insolvent after year end when the debt was already outstanding, or a settlement that confirms a year-end obligation.
A new condition is not backdated
A non-adjusting event indicates a condition that arose after the reporting date, such as a major fire after year end. Do not change year-end amounts for the new condition. If it is material, disclose its nature and estimated financial effect, or state that an estimate cannot be made.
The distinction prevents later events from rewriting the past while still giving users material information before the statements are issued. A dividend proposed after the reporting date is generally not a liability at that date because no present obligation existed then; the syllabus expects appropriate disclosure rather than a year-end accrual.
Pause and explain
A court settlement after year end confirms an obligation that existed at year end. How is it normally treated?
Worked example
A customer owing $9,000 at year end becomes insolvent three weeks later, before the statements are authorised. The customer had already stopped trading before year end. Explain the treatment.
Show the worked solution
- The later insolvency provides evidence about the customer's financial condition at the reporting date.
- It is an adjusting event if the evidence confirms the receivable was impaired at year end.
- Adjust the receivable and related expense or allowance under the applicable treatment; do not treat the whole event as a new post-year-end loss automatically.
Answer The insolvency is adjusting because the customer had stopped trading before year end. The financial statements should reflect the year-end impairment based on the evidence.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
For each event before authorisation, decide: (1) inventory held at year end is later found unsaleable because of damage that existed at year end; (2) a storm destroys an undamaged building after year end.
Give me a hint
Identify when the underlying condition arose, not only when it was discovered.
Compare my reasoning
- (1) Evidence of year-end damage makes this an adjusting event; consider a write-down.
- (2) The storm creates a new post-year-end condition, so this is non-adjusting.
- If the storm's effect is material, disclose its nature and estimated effect when practicable.
(1) Adjust the year-end inventory for evidence of the existing damage. (2) Do not adjust the year-end building amount for the later storm; disclose the material event.
Look for these in your work
- Existing condition recognized
- New condition identified
- Disclosure requirement included
The directors propose a dividend after the reporting date but before authorisation. Explain why it is not normally a year-end liability and what users may need to know.
Give me a hint
Ask whether the company had a present obligation at the reporting date.
Compare my reasoning
- The proposal or declaration occurred after the reporting date, so the company did not normally have a present obligation then.
- Do not accrue it as a liability at the reporting date solely because it was proposed later.
- Disclose the proposed dividend as required so users understand the post-period decision.
It is not normally a year-end liability because no present obligation existed at the reporting date. Disclose the proposed dividend rather than accruing it at that date.
Look for these in your work
- Obligation timing examined
- No unsupported accrual
- Disclosure considered
A business receives evidence after year end that a legal claim relates to a product sold before year end. Explain what additional facts determine whether the event adjusts the statements.
Give me a hint
Separate evidence about an existing claim from a new claim caused by a later event.
Compare my reasoning
- Establish whether the underlying sale, alleged harm and obligation-related condition existed at the reporting date.
- Assess whether the later evidence confirms a present obligation or changes a prior estimate.
- If the condition arose only after year end, classify it as non-adjusting; if material, disclose it. Apply the relevant provision criteria separately.
The event is adjusting only if the later evidence confirms a condition existing at year end. If it arises from a new post-period condition, it is non-adjusting and may require material disclosure. IAS 10 timing does not replace the IAS 37 recognition test.
Look for these in your work
- Condition date established
- IAS 10 classification reasoned
- IAS 37 distinction retained
Common mistakes
- Adjusting every event that occurs before authorisation
- Ignoring material non-adjusting events
- Assuming the event date alone identifies the condition date
What can you explain now?
What decides whether a later event is adjusting?
Compare with the explanation
Whether it gives evidence about a condition that existed at the reporting date
The underlying condition at year end, not simply the date the information arrived, determines the broad classification.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
State the difference between an adjusting event and a material non-adjusting event.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.