IAS 10 Events After the Reporting Period:…

IAS 10 Events After the Reporting Period: Adjusting vs Non-Adjusting

By Sai Manikanta Pedamallu (ACCA, CMA US, CSCA US, CGMA, ACMA, Dip IFRS, M.Com, MBA, MA)

Lead Instructor, Global Fin X | www.globalfinx.in/manikanta

For most Indian listed companies with a 31 March year end, the period between 1 April and the board meeting in May or June is one of the most consequential windows in the financial reporting cycle. The numbers are largely set. The audit is nearly complete. But the world keeps moving.

A major customer files for insolvency on 5 April. A factory burns down on 20 April. The board declares a dividend on 15 May. A court delivers judgment on an old litigation on 2 June. The financial statements are approved on 15 June.

Every one of these events happened after 31 March. Each one requires a decision: do we adjust the financial statements, or do we disclose without adjusting? One wrong call and you are either overstating assets that should be written down, or restating comparative figures that did not need restating.

IAS 10 governs that decision. It is a short standard. Fewer than 25 paragraphs. But the judgment it requires, particularly around the line between conditions that existed at year end and conditions that arose afterward, is frequently misjudged in practice.

The Reporting Period and the Authorisation Date

IAS 10 covers events occurring between the end of the reporting period and the date when the financial statements are authorised for issue. Both boundaries matter.

The end of the reporting period is straightforward: 31 March for most Indian companies, 31 December for foreign parent reporting packages.

The authorisation date is more nuanced. It is the date on which the financial statements are approved by the board of directors (or equivalent governing body) for release. For an Indian listed company, this is typically the date of the board meeting at which the accounts and the audit report are formally adopted.

Important: the authorisation date is not the date the accounts are filed with the Registrar of Companies, not the date of the AGM, and not the date the annual report is published on the company's website. Events between those later dates and the authorisation date are outside IAS 10's scope. SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations impose separate continuous disclosure obligations for material events after the authorisation date, but those are regulatory requirements, not IFRS accounting adjustments.

This creates a practical implication. If the board approves the financial statements on 20 May, events occurring on 25 May are outside IAS 10's scope entirely, even if the annual report is not published until July. The IAS 10 window closes at authorisation, not publication.

Where an entity is required to submit financial statements to a supervisory body for approval, and that body has the power to amend the statements, the authorisation date is still the date the management or board first authorises the statements, not the date of supervisory approval. This distinction rarely arises in Indian practice but matters for entities subject to regulatory approval of their financial statements.

The Core Rule: Adjusting vs Non-Adjusting

Every event within the IAS 10 window falls into one of two categories.

Adjusting events provide evidence of conditions that existed at the end of the reporting period. The financial statements must be adjusted to reflect these events.

Non-adjusting events are indicative of conditions that arose after the end of the reporting period. The financial statements are not adjusted, but material non-adjusting events must be disclosed in the notes.

The single question that determines the classification: did the condition underlying this event exist at the reporting date, or did it arise after?

That question is straightforward when the event itself is clearly post-period, a fire in May, a new contract signed in April. It becomes genuinely difficult when the event in the post-period window is the culmination of something that was developing before year end. That is where most classification errors occur.

Adjusting Events: Evidence of Conditions That Existed

IAS 10 provides examples of adjusting events. Each illustrates the same principle: the post-period event provides information about a condition that was already present at 31 March, even if the full picture was not yet clear.

Settlement of Litigation

A court delivers its judgment on a lawsuit on 15 May. The case relates to a product liability claim filed three years ago. At 31 March, the company had a provision of Rs. 30 crore.

If the judgment confirms the company's liability and awards damages of Rs. 85 crore, the financial statements must be adjusted. The liability existed at 31 March. The court judgment simply confirms the amount. The provision must be restated to Rs. 85 crore, with the Rs. 55 crore increase charged to profit or loss for the year ended 31 March.

If the judgment finds entirely in the company's favour, the provision should be reversed entirely. The condition (liability) did not actually exist at 31 March; the judgment confirms that. Reversing the provision is an adjusting event.

Indian context: Litigation involving tax demands from the Income Tax Department or GST authorities is endemic in Indian corporate life. Many large Indian companies carry significant contingent liabilities for tax disputes that have been running for years. When a post-year-end tribunal order or High Court judgment resolves a dispute, the event is adjusting because the tax liability or non-liability existed at the reporting date. The judgment just quantifies it.

Discovery of Fraud or Errors

If fraud or an accounting error is discovered after year end but before the authorisation date, and the fraud or error relates to the period being reported, the adjustment is made before the financial statements are authorised. This connects to IAS 8 on prior period errors. The discovery mechanism is IAS 10. The correction mechanism is IAS 8.

Bankruptcy of a Customer

A customer that owed Rs. 40 crore at 31 March files for insolvency under the Insolvency and Bankruptcy Code on 12 April. Is this adjusting?

The answer depends on when the customer's financial distress began. If the customer was already in serious financial difficulty at 31 March, the insolvency filing confirms a condition that existed at year end. The trade receivable should be written down as an adjusting event. The post-period filing is evidence of the credit impairment that existed at 31 March.

If the customer was solvent at 31 March and a completely unexpected event, say a factory explosion, caused sudden financial collapse in April, the insolvency filing reflects a condition that arose after year end. That is a non-adjusting event.

In practice, a customer rarely goes from perfectly healthy to insolvent in two weeks. When an insolvency filing occurs shortly after year end, the audit team investigates the customer's financial position at the reporting date. Signs of distress at 31 March, overdue payments, covenant breaches, reliance on a single contract that was already at risk, all point toward an adjusting event.

Indian example: An NBFC customer of a mid-sized Indian manufacturer has been rolling over short-term loans repeatedly through the year, suggesting liquidity stress. It defaults formally on 8 April. The manufacturer's auditor investigates and finds the NBFC had negative net worth at 31 March and had breached regulatory capital ratios before year end. The receivable impairment is adjusting. The condition, credit impairment, existed at 31 March.

Determination of Costs and Sale Proceeds After Year End

If the cost of assets purchased or sale proceeds from assets disposed of before year end are determined after year end, those amounts are adjusting. The transaction occurred before 31 March; the price was confirmed after.

This is common in Indian real estate transactions where consideration for property deals is sometimes structured with deferred price determination mechanisms, and in commodity contracts where provisional pricing adjustments are made after delivery. The final price determination post-year-end adjusts the asset or revenue figure as at 31 March.

Inventory Sold Below Carrying Amount After Year End

If inventory is sold after year end at a price below its carrying amount, this provides evidence that the net realisable value of that inventory was already below cost at 31 March. The inventory should be written down to NRV as at 31 March. This is a classic adjusting event under IAS 2's NRV requirement, confirmed by post-period evidence.

Indian context: A textile manufacturer closes its books at 31 March with a large inventory of cotton fabric at cost of Rs. 18 crore. In April, it sells a significant portion of that inventory at Rs. 13 crore after receiving intelligence that a major overseas buyer has cancelled orders, depressing prices. The April sale price confirms that NRV was already below cost at 31 March. The inventory should be written down to Rs. 13 crore in the 31 March financial statements.

Non-Adjusting Events: Conditions That Arose After Year End

Non-adjusting events arise from conditions that did not exist at 31 March. The financial statements are not changed. If the event is material, it is disclosed in the notes.

Decline in Market Values After Year End

A fall in the fair value of investments after the reporting date is a non-adjusting event. The market decline reflects conditions in April or May, not conditions at 31 March. The financial statements reflect 31 March values.

This is one of the most commonly misapplied rules in Indian practice. An Indian company holds equity investments classified at FVTPL. The stock market falls sharply in April. The CFO wants to write down the portfolio to April values. That is wrong. The portfolio is measured at 31 March fair values. The April decline is disclosed as a non-adjusting event if material, not adjusted.

The same logic applies in the other direction. A company that holds unlisted equity at cost or at a carrying amount below fair value cannot write up the carrying amount because of a valuation report obtained in April. If the higher value reflects conditions that arose after year end, it is non-adjusting.

Major Business Acquisitions or Disposals After Year End

If an acquisition or disposal of a major subsidiary or business unit is completed after year end, it does not affect the 31 March financial statements. The transaction is disclosed as a non-adjusting event. The consolidation perimeter at 31 March does not include the acquired entity.

Indian example: Tata group announces the acquisition of a significant stake in an overseas technology company on 10 April. The deal was announced publicly for the first time on that date. No part of this transaction affects the 31 March consolidated financial statements. It is disclosed as a significant subsequent event.

Contrast this: if Tata had signed a binding sale and purchase agreement before 31 March, but the deal closed after 31 March, the question of whether control transferred before or after 31 March governs whether the subsidiary is consolidated. That is an IFRS 10 control question, not purely an IAS 10 question, but IAS 10 informs the disclosure.

Announcement of a Restructuring Plan After Year End

If the board formally approves a restructuring plan after year end, no restructuring provision is recognised at 31 March. Under IAS 37, a restructuring provision requires a constructive obligation, which arises only when the entity has a detailed formal plan and has raised a valid expectation in those affected. If that expectation was not raised before 31 March, the provision cannot exist at 31 March. The post-year-end announcement is a non-adjusting event.

This interacts with a common governance pattern in Indian listed companies: the board approves the annual results and simultaneously announces a restructuring. The restructuring is disclosed as a subsequent event. The 31 March financial statements carry no provision for it.

Natural Disasters and Casualties After Year End

A factory fire, flood, or earthquake after year end is a non-adjusting event. The asset existed and was intact at 31 March. The loss arose after year end. The financial statements reflect the asset at its 31 March carrying amount. The post-period destruction is disclosed.

Indian example: A food processing company in Maharashtra suffers significant damage to its cold storage facility in a fire on 25 April. The facility had a carrying amount of Rs. 22 crore at 31 March. The fire is a non-adjusting event. The 31 March balance sheet still shows the facility at Rs. 22 crore. The notes disclose the fire, the estimated loss (say Rs. 16 crore net of expected insurance recovery), and its expected impact on operations.

The insurance recovery angle matters here. If the company had an insurance claim outstanding at 31 March for a separate, earlier event, and the insurer settles that claim in April, that settlement confirms what the receivable was worth at 31 March. That is adjusting. The post-period fire claim is different: the claim arose after year end, so any insurance receivable in respect of the April fire is a non-adjusting item that cannot be recognised at 31 March.

Dividends: A Specific Rule

IAS 10 contains an explicit rule on dividends that differs from how many Indian companies previously operated under old Indian GAAP.

Dividends declared after the reporting date but before the financial statements are authorised for issue are non-adjusting events. They must not be recognised as a liability at the reporting date.

The reasoning: at 31 March, the entity has no present obligation to pay the dividend. The obligation arises only when the dividend is declared. If the board declares the dividend in May, the liability does not exist at 31 March.

Under old Indian GAAP (AS 4 and the Companies Act 1956 framework), it was common practice to recognise proposed dividends as a current liability at year end, even before formal declaration. The Companies Act 2013 changed the legal framework, and Ind AS 10 aligns with IAS 10: proposed dividends that have not been declared before year end are not liabilities.

Despite this being settled law for years now, I still encounter Indian companies that carry a "provision for proposed dividend" on their 31 March balance sheet. It is wrong. The dividend is disclosed as a non-adjusting event in the notes: "Subsequent to the reporting date, the board of directors has recommended a dividend of Rs. X per share, subject to shareholder approval at the AGM." That is disclosure, not recognition.

The note should not describe it as "proposed" if the board has formally declared it. A declared dividend is a legal obligation from the declaration date. A recommended dividend, still subject to shareholder approval at the AGM, is not a present obligation. The language in the note must reflect the legal status accurately.

Going Concern: When the Assumption Fails After Year End

IAS 10 contains a specific provision for the going concern assumption. If management determines, after the reporting date, that it intends to liquidate the entity or cease trading, or that it has no realistic alternative but to do so, the financial statements must not be prepared on a going concern basis even if the reporting date precedes that determination.

This is a significant override. The standard is saying: if going concern is no longer appropriate at the authorisation date, you cannot use it as the basis for the financial statements even though the reporting date was earlier and going concern was appropriate at that date.

The practical consequence: if between 31 March and 15 June (the authorisation date) the board concludes the entity cannot continue as a going concern, the 31 March financial statements must be prepared on a non-going concern basis. Assets are remeasured. Liabilities include wind-down costs. Every assumption built into the financial statements on the basis of continuing operations must be revisited.

Indian context: Think of what happened with several Indian infrastructure companies in 2018 and 2019. If the board of a road developer concluded in May that it could not service its debt and had no realistic refinancing options, the financial statements for the year ended 31 March had to reflect that conclusion, even though the formal default might have occurred after year end. This is why going concern disclosures in the post-period window require urgent attention when a company's liquidity position is uncertain.

IAS 10 also requires disclosure of events after the reporting date that indicate going concern uncertainty, even if the uncertainty does not rise to the level of concluding that going concern is inappropriate. This connects to the going concern disclosure requirements in IAS 1, which we covered in Post 3.

Promoter share pledging is endemic in Indian listed companies. SEBI data consistently shows hundreds of listed companies where promoters have pledged significant portions of their shareholding to banks and NBFCs as collateral for loans. When the pledge occurs or the pledged percentage changes, SEBI requires immediate disclosure to the stock exchanges under the LODR Regulations.

From an IAS 10 perspective, a pledge executed after year end is a non-adjusting event. It does not affect the 31 March financial statements. But it may require disclosure as a subsequent event if material to users' understanding of the entity's capital structure and the risk that the promoter's economic interest in the company could change significantly.

The Satyam case made this consideration acutely relevant in Indian practice. One of the governance failures at Satyam was that the promoters had pledged virtually all their shares to fund personal borrowings, creating a situation where any adverse stock price movement could trigger forced selling and a dramatic change in the ownership structure. Under IAS 10's non-adjusting event disclosure requirements, a pledge of this magnitude occurring before year end (or after year end but before authorisation) would need disclosure if material. The question is: does this information affect users' assessment of the entity's financial position and prospects?

For Indian listed companies: the SEBI continuous disclosure obligation and the IAS 10 financial statement disclosure obligation are separate requirements. SEBI disclosure is immediate and regulatory. IAS 10 disclosure appears in the notes to the annual financial statements. Both may be triggered by the same event, but they serve different purposes and different audiences.

Disclosures for Non-Adjusting Events

When a non-adjusting event is material, the entity discloses:

The nature of the event
An estimate of its financial effect, or a statement that such an estimate cannot be made

The disclosure does not require a precise number if the financial effect is genuinely uncertain. But a statement that "the directors are unable to estimate the financial impact at this time" must reflect genuine uncertainty, not avoidance. If the financial effect can be estimated, it must be disclosed.

What a strong non-adjusting event note looks like:

> "Subsequent to 31 March 2026, the company's Pune manufacturing facility was damaged by flooding on 18 April 2026. Assets with a carrying amount of approximately Rs. 85 crore were affected. The company holds insurance coverage for property damage and business interruption. An insurance claim has been filed. The net financial impact, after expected insurance recovery, is estimated to be in the range of Rs. 15 crore to Rs. 25 crore. The facility is expected to resume operations by September 2026."

Compare that to what I often see: "Subsequent to the reporting date, certain events have occurred which may have an impact on the financial statements." That discloses nothing useful and likely does not satisfy IAS 10's requirements.

The Boundary Problem: Hard Cases

Some events after the reporting date are genuinely difficult to classify. These are the situations I spend the most time on in class because they require judgment rather than rule-following.

Regulatory Actions

SEBI issues an order against an Indian company on 20 April for market manipulation that allegedly occurred during the year ended 31 March. Is this adjusting?

It depends on when the conduct occurred and when the regulatory exposure crystallised. If the conduct happened before 31 March, SEBI's investigation was ongoing, and a reliable estimate of the penalty was possible at 31 March, then a provision should have been recognised at year end under IAS 37. The order in April confirms and quantifies what was already a probable outflow. Adjusting.

If the conduct occurred before year end but the regulatory investigation was not announced until after year end, and there was no information available at 31 March that would lead management to anticipate a penalty, the question becomes harder. Was the liability probable at 31 March? If not, the order is arguably a non-adjusting event revealing a condition that was only crystallised by the regulatory process after year end.

In practice, auditors take a careful look at what management knew or should have known at 31 March. Legal counsel opinions, internal compliance reports, and regulatory correspondence before year end all inform this assessment.

Global Macro Events

COVID-19 in early 2020 is the most significant recent example. For companies with 31 December 2019 year ends, the question was: does the pandemic that became globally apparent in January and February 2020 represent conditions existing at 31 December 2019, or conditions arising after?

The IASB and various national standard-setters provided guidance. The conclusion for most jurisdictions: COVID-19 was a non-adjusting event for 31 December 2019 year ends. The conditions that caused the economic disruption arose after year end, even though the virus itself was present before. The financial statements reflected 31 December 2019 values; the pandemic was disclosed as a non-adjusting subsequent event with an assessment of expected impact.

For Indian companies with 31 March 2020 year ends, the situation was different. By 31 March 2020, the pandemic was fully established, lockdowns were in place, and the economic impact was already materialising. Going concern assessments, receivable impairments, and contract modification accounting all had to be addressed in those financial statements on the basis of conditions that existed at 31 March 2020.

Ind AS 10 vs IAS 10: Differences

Ind AS 10 is essentially identical to IAS 10. The differences are negligible.

Area	IAS 10	Ind AS 10
Adjusting events	Evidence of conditions at year end	Same
Non-adjusting events	Conditions arising after year end	Same
Dividend treatment	Non-adjusting, not recognised as liability	Same
Going concern override	Required if going concern fails after year end	Same
Disclosure requirements	Nature and financial effect of material non-adjusting events	Same
Interaction with Companies Act	Not applicable	Section 134 requires board's report to address material changes and commitments after year end; SEBI LODR Regulation 30 requires immediate disclosure of material events

The Companies Act 2013 dimension is worth highlighting. Section 134(3)(l) of the Act requires the directors' report to include a statement on material changes and commitments, if any, affecting the financial position of the company, which occurred between the end of the financial year and the date of the directors' report. This is a parallel disclosure requirement that sometimes overlaps with IAS 10 notes disclosures. Indian finance teams need to ensure consistency between the two: what appears in the directors' report as a material subsequent event should be consistent with what appears in the IAS 10 notes, and vice versa.

What Big 4 Auditors Focus On in IAS 10

Three areas dominate the subsequent events review in every audit.

Completeness of the post-balance sheet review. Auditors perform specific procedures to identify subsequent events, including reading board minutes for the period after year end, reviewing management accounts for the post-period months, reviewing legal correspondence, and obtaining representations from management that all material subsequent events have been disclosed. The key word is completeness: the risk is not just misclassification but that material events are not identified at all.

Classification discipline. When a material post-period event is identified, auditors challenge the classification. The most common error is treating adjusting events as non-adjusting to avoid changing the financial statements. The customer insolvency scenario is the most frequent: management wants to treat a post-period insolvency as non-adjusting because adjusting would require a write-down that reduces profit. The auditor asks: was there evidence of credit impairment at year end? If yes, it is adjusting.

Dividend recognition. Despite years of Ind AS adoption, the "provision for proposed dividend" error persists in Indian financial statements. Auditors look for it specifically.

Five Common Mistakes on IAS 10

1. Treating Every Post-Period Event as Non-Adjusting

The default assumption in some finance teams is that anything happening after 31 March is a subsequent event requiring only disclosure. This is wrong. If the event confirms conditions at 31 March, it is adjusting. Classification requires analysis of when the underlying condition arose, not just when the event occurred.

2. Recognising Proposed Dividends as Liabilities

Covered extensively above. Still the most widespread error in Indian Ind AS financial statements from the transition generation. The proposed dividend goes in the notes, not on the balance sheet.

3. Adjusting for Post-Period Market Price Movements

Post-period falls or rises in quoted equity prices, commodity prices, or currency rates are non-adjusting. The financial statements reflect values at 31 March. I see companies that want to write down their FVTPL equity portfolio to April values because the market fell. That is wrong.

4. Ignoring the Authorisation Date

Some finance teams treat the subsequent events window as the period between year end and the date of signing the audit report, or between year end and the AGM. Both are wrong. The window closes at the date the board authorises the financial statements for issue. Events between that date and the AGM or the public release date are outside IAS 10.

5. Inadequate Disclosure of Material Non-Adjusting Events

The note must include the nature of the event and an estimate of the financial effect. "The directors are monitoring the situation" is not adequate disclosure for a material non-adjusting event. The note must tell the user what happened and what it means financially, or explain why the financial effect cannot be estimated.

FAQ

Can an event be both adjusting and non-adjusting for different parts of the financial statements?

Yes, in principle. A post-period event can provide evidence about conditions at year end for some purposes (adjusting) while also revealing new conditions that arose after year end (non-adjusting). The two aspects require different treatment: adjust the amounts affected by the year-end condition, and disclose the new condition separately.

What if the board approves the financial statements in stages?

The authorisation date is the date of the final approval that authorises the financial statements for release. If the audit committee reviews and recommends approval, and then the board formally approves a week later, the authorisation date is the board approval date.

Are events after the authorisation date covered by IAS 10?

No. Events after the authorisation date are outside IAS 10's scope. However, if the financial statements have not yet been published and the event is material, good governance and SEBI LODR Regulation 30 obligations may require disclosure through other mechanisms.

What happens if management discovers a material subsequent event after the financial statements are authorised but before they are published?

IAS 10 does not require amendment of the financial statements in this case. However, if the event is very significant, the entity may choose to update the financial statements or issue a supplementary note. SEBI's continuous disclosure requirements may require immediate exchange notification regardless.

Is a change in tax rates after year end an adjusting or non-adjusting event?

Non-adjusting. The tax rate at the reporting date is the rate enacted or substantively enacted at that date. A new rate enacted after year end reflects a post-period condition. Deferred tax balances are measured at 31 March rates.

Does IAS 10 apply to interim financial statements?

IAS 34, which governs interim financial reporting, includes requirements similar to IAS 10 for subsequent events between the interim reporting date and the date of authorisation of the interim statements.

Can a company reopen its financial statements to reflect a subsequent event after authorisation?

Under IAS 10, once financial statements are authorised, post-period events do not require amendment of the financial statements. Under the Companies Act 2013, Section 131 permits voluntary revision of financial statements with NCLT approval in specific circumstances, but this is a different mechanism from subsequent event accounting.

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This is Post 9 of the Global Fin X IFRS Series. Previous: IAS 8: Accounting Policies, Estimates and Errors: Where Companies Get It Wrong. Next: IFRS 1: First-Time Adoption: Exemptions, Ind AS Transition and What Indian Companies Did.

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