How to Identify and Document Events After the Reporting Period Under IAS 10

What IAS 10 actually requires (and where the standard draws the line)

IAS 10 splits events after the reporting period into two categories. Adjusting events provide evidence of conditions that existed at the balance sheet date. Non-adjusting events indicate conditions that arose after. The distinction sounds clean in theory. On a real engagement, it rarely is.

The standard itself is short. IAS 10 runs to 22 paragraphs of requirements plus application guidance. The difficulty isn’t the volume of rules. It’s the judgment required at the boundary between “evidence of a condition that existed” and “a new condition that happened to emerge.” Two auditors looking at the same customer insolvency can reasonably disagree on which side of IAS 10.3 it falls. Your file needs to show why you landed where you did.

IAS 10.8 and IAS 10.9 give you worked indicators. The settlement of a court case after year-end confirms an obligation that existed at the balance sheet date. That’s adjusting (IAS 10.9(a)). Receiving information showing an asset was impaired at year-end is adjusting (IAS 10.9(b)). A decline in fair value of investments between year-end and authorisation date is explicitly non-adjusting (IAS 10.11(b)), because the decline reflects conditions that arose after.

Pay attention to IAS 10.9(b)(ii). The bankruptcy of a customer occurring after the reporting period “usually confirms that a loss existed at the end of the reporting period.” That word “usually” carries weight. If the customer was financially healthy at 31 December and a sudden event (a fire, a fraud) caused the insolvency in January, the loss didn’t exist at the balance sheet date. The insolvency itself is the same; the classification changes based on the underlying condition.

The assessment window closes when the financial statements are authorised for issue (IAS 10.7). For most non-Big 4 audit clients, this is the date the board approves the financial statements. IAS 10.17 requires the entity to disclose that date. If your client doesn’t have a formal board approval process, you need to establish what “authorised for issue” means for this entity before you can define the window. Paragraph 6 notes that in some jurisdictions the entity must submit the statements to shareholders for approval after issue; events after that authorisation date fall outside IAS 10 entirely.

The adjusting vs. non-adjusting decision in practice

The theoretical framework is straightforward. The practical difficulty is that most events don’t arrive with a label attached.

Consider a product liability claim. The claimant files suit on 15 January for a product sold on 10 November. At 31 December, the entity knew about customer complaints but hadn’t received the formal claim. Under IAS 37, the question at year-end was whether a present obligation existed. The January filing confirms it did. That makes it adjusting under IAS 10.9(a). But shift the facts: if the product was sold on 28 December and the first complaint arrived on 5 January, no obligation existed at year-end. The filing is a non-adjusting event requiring disclosure under IAS 10.21 if material.

Same event type. Different classification. The differentiator is whether the condition (not the event) existed at the balance sheet date.

How the condition timestamp works in practice

The phrase “evidence of conditions that existed at the end of the reporting period” in IAS 10.3(a) is doing all the work. The event itself always occurs after year-end (that’s why it’s in the scope of IAS 10). What matters is whether the event provides new information about something that was already true at the balance sheet date, or whether the event itself created a new situation.

A useful test: if you could travel back in time to 31 December and examine the entity’s position with perfect information, would you see the condition? If the customer’s financial distress was already present (late payments, covenant breaches, declining margins), the January insolvency confirms what existed. If the customer was solvent at year-end and a January factory explosion caused the failure, the condition didn’t exist at 31 December.

This test also applies to inventory write-downs. If the entity sells inventory in February at below its carrying amount, IAS 10.9(b)(i) treats that as evidence of the net realisable value at year-end. The sale happened after year-end, but the market conditions that drove the price existed at year-end. Contrast this with a product recall announced in February due to a manufacturing defect discovered in January. The defect may have existed at year-end (adjusting) or may relate to a production run in January (non-adjusting). The manufacturing records determine the classification.

Here’s a decision sequence that works on real files:

1. Identify the event. What actually happened after year-end?
2. Identify the condition. What underlying situation does this event provide evidence about?
3. Timestamp the condition. Did that underlying situation exist at or before 31 December?
4. If yes: adjusting event (IAS 10.8). Adjust the financial statements to reflect the new information.
5. If no: non-adjusting event (IAS 10.10). Disclose under IAS 10.21 if material.

The trickiest cases involve deteriorating situations. A client’s cash position weakens throughout Q4, covenant waivers are requested in November, the bank refuses the waiver in February. The refusal happened after year-end. But the deterioration (the condition) was underway at year-end. The refusal is evidence of a condition that existed. Adjusting.

Document each event separately in the working paper. Don’t batch events into a single “subsequent events assessment.” Each one needs its own condition timestamp, its own classification rationale, and its own financial statement impact (or reason for no impact).

What IAS 10.21 requires for non-adjusting events

When you classify an event as non-adjusting and it’s material, IAS 10.21 requires two things: the nature of the event, and an estimate of its financial effect (or a statement that such an estimate cannot be made). That second requirement often gets missed. A note that says “After the reporting period, the entity entered into a binding agreement to acquire Company X” satisfies the nature disclosure. But IAS 10.21(b) also requires the financial effect. If the acquisition price is €12M, that number belongs in the note.

The “cannot be made” escape valve in IAS 10.21(b) is narrow. You can only use it when an estimate genuinely cannot be produced, not when it would be inconvenient or imprecise. If the entity is acquiring a business for a known price, the financial effect is estimable. If the entity faces a novel regulatory action with no precedent and no quantifiable exposure range, the escape valve applies. Document why the estimate cannot be made, not just that it can’t.

Dividends declared after the reporting period

IAS 10.12 and IAS 10.13 handle dividends proposed or declared after the balance sheet date but before authorisation for issue. These are non-adjusting events. The entity does not recognise them as a liability at the balance sheet date, because no obligation exists at that date (the declaration hadn’t occurred yet). IAS 10.13 requires disclosure of the amount. IAS 1.137 reinforces this.

This catches out entities that prepare their financial statements using a template from the prior year. If last year’s statements recognised a proposed dividend as a liability (which was the practice under older frameworks), the template may carry that treatment forward. Check it.

Going concern after the reporting period: the IAS 10.14 trap

IAS 10.14 through IAS 10.16 deal with the most consequential post-balance-sheet scenario: when an entity’s ability to continue as a going concern deteriorates after the reporting period. If management determines after the balance sheet date that it intends to liquidate or cease trading, the entity does not prepare the financial statements on a going concern basis (IAS 10.14). This is not an option. It’s a requirement.

The trap for auditors is IAS 10.15. Even if the going concern problems didn’t meet the threshold for doubt at the balance sheet date, the post-balance-sheet deterioration may be so severe that the going concern basis itself is inappropriate. In that scenario, IAS 10.15(a) requires a fundamental change in the basis of accounting, not just additional disclosure.

Contrast this with a case where the going concern problems are serious but the entity is still a going concern at the authorisation date. There, IAS 10.16 requires disclosure of the post-balance-sheet deterioration as a non-adjusting event. The financial statements stay on the going concern basis, but the note disclosure under IAS 10.21 must be explicit about the nature of the threat and its potential financial effect.

The ISA 570 audit requirements layer on top of this. ISA 570.11 requires you to evaluate whether events or conditions identified after year-end cast significant doubt on going concern. If the client’s bank pulls the facility in January, you can’t ignore it because “the balance sheet date was 31 December.” IAS 10.14–16 and ISA 570 both demand that you respond to the information you have at the date you sign the opinion.

From a documentation standpoint, the going concern post-balance-sheet assessment needs to be a separate section in your going concern working paper, not embedded in the general subsequent events memo. The stakes are different. A missed non-adjusting disclosure is an error in the notes. A missed going concern trigger can invalidate the basis of preparation.

What auditors must do under ISA 560

IAS 10 governs the entity’s accounting. ISA 560 governs your audit work. The two interlock but aren’t identical, and auditors who treat “subsequent events” as a single exercise often miss the ISA 560 requirements that go beyond IAS 10.

ISA 560.7 requires you to perform procedures designed to obtain sufficient appropriate audit evidence that all events between the date of the financial statements and the date of the auditor’s report that require adjustment or disclosure have been identified. Paragraph 7 is not satisfied by asking management a single question at the end of fieldwork. The procedures must be designed. They must be documented. And they must cover the full window.

ISA 560.7(a)–(d) specifies four categories of inquiry and procedure. The auditor inquires about whether any events have occurred that might affect the financial statements. Reading minutes of meetings of the entity’s governing bodies held after the date of the financial statements is required. You also read the entity’s latest available interim financial statements. ISA 560.7 further requires inquiry about the status of items accounted for on the basis of preliminary or inconclusive data. That last requirement catches situations where the year-end provision was based on an estimate, and the actual amount became known after year-end.

The critical date is the date of the auditor’s report, not the date of the entity’s authorisation for issue. ISA 560.10 requires active inquiry right up to the date you sign. If you complete fieldwork on 1 March but sign the opinion on 15 March, you need evidence covering that gap. A management representation letter dated 1 March doesn’t cover 2–15 March. The representation letter date should match (or be very close to) the opinion date.

One practical point that gets overlooked: ISA 560.14 deals with facts discovered after the auditor’s report has been issued. If a material event comes to light after you’ve signed but before the financial statements are issued to members, you have an obligation to act. The entity must amend the financial statements. If management refuses, ISA 560.14(b) requires you to take action to prevent reliance on the auditor’s report. This is rare, but the obligation exists, and your firm’s quality management policies should have a protocol for it.

Worked example: Brouwer Metaal B.V.

Scenario: Brouwer Metaal B.V. is a Dutch steel components manufacturer with €28M revenue and a 31 December 2024 year-end. The financial statements will be authorised for issue on 18 March 2025. Between year-end and authorisation, four events occur.

Event 1: Customer insolvency (adjusting)

On 22 January 2025, Dekker Bouw B.V. (a customer owing €640K at year-end) files for surseance van betaling. Brouwer’s credit control team had placed Dekker on a watch list in November 2024 after two late payments.

Event 2: Fire at warehouse (non-adjusting)

On 3 February 2025, a fire destroys Brouwer’s secondary warehouse. The warehouse held €1.8M of finished goods inventory. Insurance coverage is €1.4M.

Event 3: Settlement of legal claim (adjusting)

On 28 February 2025, Brouwer settles a product liability claim for €280K. The claim was filed in September 2024 and a provision of €200K was recognised at year-end based on legal counsel’s estimate.

Event 4: Dividend declaration (non-adjusting, disclosure required)

On 10 March 2025, the board proposes a dividend of €0.85 per share (total €425K). The AGM is scheduled for April 2025.

Conclusion: The 2024 financial statements are adjusted for Events 1 and 3 (net impact: €624K additional expense). Events 2 and 4 require note disclosure with financial effect estimates. A reviewer opening this file sees each event documented individually, with a condition timestamp, a classification rationale citing the specific IAS 10 paragraph, and the resulting financial statement treatment.

Your documentation checklist

1. Confirm the authorisation-for-issue date with management in writing (IAS 10.17 requires the entity to disclose this date; you need it to define the assessment window)
2. Maintain a separate log for each post-balance-sheet event rather than a single narrative memo. Record the date each event occurred, the condition it relates to, whether that condition existed at the balance sheet date, your classification (adjusting or non-adjusting), and the financial statement impact
3. With adjusting events, cross-reference each adjustment to the relevant line item in the trial balance and verify the journal entry has been posted before signing
4. When you classify a non-adjusting event as requiring disclosure, draft the IAS 10.21 note disclosure yourself if the client hasn’t. Verify it includes both the nature and the financial effect (or the explicit statement under IAS 10.21(b) that the effect cannot be estimated, with reasoning)
5. Document the going concern reassessment as a separate section. Cross-reference to ISA 570 working papers if the post-balance-sheet period reveals new indicators
6. Obtain a written representation from management covering events up to the date the auditor’s report is signed, not just to the authorisation-for-issue date

Common mistakes regulators flag

• Incomplete subsequent events window: The AFM has flagged files where the subsequent events review covers only the period up to the date of the auditor’s fieldwork, missing events between fieldwork completion and opinion date. ISA 560.10 requires active inquiry right up to the auditor’s report date. A two-week gap between your last inquiry and your signature is a gap in your evidence.
• Defaulting customer insolvencies to non-adjusting: The PCAOB’s 2023 inspection observations noted that audit teams frequently fail to assess whether credit deterioration existed at year-end, defaulting to “new event” classification without documenting the condition analysis required by IAS 10.9(b)(ii).

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Further reading and source references

• IAS 10, Events After the Reporting Period: the source standard governing the classification of adjusting and non-adjusting events and the related disclosure requirements.
• ISA 560, Subsequent Events: the audit standard requiring procedures from the date of the financial statements through to the date of the auditor’s report.
• IAS 37, Provisions, Contingent Liabilities and Contingent Assets: the recognition criteria that feed directly into IAS 10 adjusting event classification for legal claims and restructuring provisions.
• ISA 570, Going Concern: the audit standard requiring evaluation of events or conditions that cast significant doubt on going concern, including post-balance-sheet indicators.