Objective

As part of the business world, it is normal that some events may take place after the
reporting period, but before the date of authorization of financial statements for issue,
and which might reflect some information that needs to be considered before the financial
statements are authorized for issue.
This Standard provides guidance for the accounting treatment of the events, which take
place after the reporting period, but before the date of authorization of financial
statements for issue, related disclosure requirements, and in what circumstances:
(a) The entity will adjust its financial statements before issuance, and
(b) When only disclosures are required for these events
Scope
The requirements of this standard are applicable to account for Events after Reporting
Period and related disclosures.
Definitions
Events after the Reporting Period:
The events which take place after the reporting date but before the date of authorization
of financial statements for issue are called events after reporting period. These may be
favorable or unfavorable.
These are classified into two categories as:
 Adjusting Events
 Non-adjusting Events
Adjusting Events:
Those which take place after the reporting date but before the date of authorization of
financial statements for issue, and provide additional/further evidence related to the
conditions which existed at reporting date.
Non-adjusting Events:
Those which take place after the reporting date but before the date of authorization of
financial statements for issue, and are indicative of the conditions which arose after the
reporting date.
Recognition & Measurement
1. Adjusting Events:
The entity is required to account for the adjusting events by adjusting their potential
financial impacts in financial statements before these are finalized and issued.
Application Examples:
Following are the examples of adjusting events, for which entity is required to adjust its
financial statements before issuance:
 The receipt of information regarding the bankruptcy of acustomer after the reporting
date, which was stated as receivable at year end, provides evidence that the debt
has become irrecoverable and the entity should adjust the value of receivable
reported in statement of financial position.
 Reduction in Net realizable Value of Inventory after the reporting date, stated at cost
at year end,indicated from the sale of inventory at low selling price after the reporting
 date, provides evidence that the value of inventory has fallen down and entity needs
to adjust the value of inventory included in statement of financial position.
 The receipt of information after the reporting date, confirming that the asset is
impaired existed at the reporting date.
 The determination of purchase/selling price of an asset after the reporting date,
bought or sold during the current year.
 The settlement of a court case after the reporting date, which was initiated during
the current year, will provides evidence that entity has an obligation at year end
therefore, entity should adjust the financial statements accordingly.
 The identification of a fraud, or any error after the reporting date.
2. Non-adjusting Events:
In respect of non-adjusting events, no adjustment is required in financial statements
instead IAS 10 requires such events to be disclosed in the notes to accounts if these
are considered to be material, otherwise these will be ignored.
Application Examples:
(a) Any loss which arises after the reporting date because of natural disasters such as
fire or flood.
(b) Any sale or purchase of asset after the reporting date.
(c) Sale or discontinuation of a business line after the reporting date.
(d) Fall in value of investment after the reporting date.
(e) Dividend declared after the reporting date
(f) Any business acquisition after the reporting date.
(g) The commencement of a court case due to the events which take place after the
reporting date.
(i) Any changes in the tax rates/laws after the reporting date, applicable to previous year
Note:
If an event takes place after the date of authorization of financial statements, it will be
neither adjusting nor non-adjusting instead it will be outside the scope of IAS 10.
Going Concern
IAS 10 requires, if an event occurs after the reporting date but before the date of
authorization of financial statements for issue and it materially/severally
affects the going concern status of the entity the such event will always be treated
as adjusting event irrespective of the definition it satisfy.
For such event, the entity will prepare its financial statements on break-up basis.
Disclosures
IAS 10 requires the entity to disclose the following:
 The date of authorization of financial statements and related authority.
 For Non-adjusting events the entity should disclose
 The nature of such event and
 Its financial impact

Worked Example:
AB Ltd engaged in manufacturing facility and has year end of 31 December 2012. Its
date of authorization of financial statements for issue was 10 February 2013 and the
annual general meeting is scheduled on 7 March 2013. The following events occurred as
follows:
(a) The company's major warehouse and the inventory it contained, was completely
damaged because of a fire explosion took place on 12 January 2013. The warehouse
and the inventory were to have a carrying value $20 million and $12 million respectively
on this date.
The company is expected to recover up to maximum of $18 million as it has not updated
its insurance cover. The operations of the entity were severally interrupted and the entity
expects to face losses for coming few years.
(b) A particular type of inventory held by AB Ltd at a different location was recorded at its
cost of $920,000 at 31 December 2012 in the statement of financial position. The entity
sold 70% of this inventory for $560,000 on 15 January 2013, incurring a commission
expense of 15% of the selling price of the inventory.
(iii) The government introduced tax changes on 13 March 2013, due to which the tax
liability recorded by entity at 31December 2012, will increase by $960,000.
Required
Explain the appropriate accounting treatment of the events in the financial statements of
AB Ltd. for the yearended 31 December 2012.
Solution:
(a) It will be treated as non-adjusting event as IAS 10 requires any event which gives rise
to loss due to a natural disaster such as fire, flood to be classified as non-adjusting event
because such events do not provide evidence of the conditions existed at reporting date.
However, if this event has affected the going concern status of the entity then it will be
treated as adjusting event and entity will have to prepare its financial statements as per
break-up values.
The Insurance claim should be disclosed as a contingent asset in the notes to
accounts.
(b)This will be treated as adjusting event as sale of inventory after the reporting date
reflects that the NRV of inventory is less than the cost. The NRV of 70% inventory is
$476,000 calculated using the selling price of $560,000 less commission expense of
$84,000 ($560,000*15%), and it has a cost of$644,000 ($920,000*70%). Therefore, the
entity will need to adjust down the value of inventory to its NRV of $680,000
($476,000/70 * 100%)in the statement of financial position for the year ended 31
December 2012.
(c)This will treated as outside the scope of IAS 10 as it has occurred after the date of
authorization of the financial statements for issue. If it had have occurred after the
reporting date but before the date of authorization of financial statements for issue, then
in such situation it would have been treated as non-adjusting event.