Ind AS 10: Events After the Reporting Period — A Clear Guide

One of the trickiest topics in CA Intermediate and Final accounts is Ind AS 10 (Events After the Reporting Period). Every year, bright students lose marks because they confuse when to adjust an event in the financial statements and when to disclose it as a note. Today, let's untangle this together.

What Exactly Is an Event After the Reporting Period?

Imagine your company's financial year ends on 31 March 2024. But on 5 April 2024, before you finalise and approve the financial statements, something significant happens—a major customer defaults, a key building catches fire, or a court ruling comes through.

An event after the reporting period is anything that occurs between the end of the reporting period (31 March) and the date the financial statements are authorised for issue (usually the board approval date). This window is crucial.

Why? Because that event provides evidence of a condition that existed at the reporting date—or it reveals something brand new after the year ended.

The Golden Rule: Adjusting vs Non-Adjusting

Ind AS 10 draws a hard line:

Adjusting Events (AKA Recognised Events)

These are events that provide additional evidence about conditions existing at the reporting date.

Key characteristic: The event reveals something that was already there on 31 March, but we only found out later.

What you do: Adjust the amounts in the financial statements. Change the figures, don't just add a note.

Common examples:

  • Receivable becomes a bad debt. A customer who owed you money on 31 March goes bankrupt on 5 April. You now have clear evidence that the debt won't be collected. You should have made a provision on 31 March itself. Adjust the receivables figure and bad debt expense.
  • Inventory found to be obsolete. On 1 April, you discover that inventory sitting in your warehouse on 31 March is now worthless because the product is outdated. The obsolescence existed on 31 March; you just found out later. Adjust inventory and cost of goods sold.
  • A court case settled. If a lawsuit that was pending on 31 March is settled in April for an amount that provides evidence of the liability that existed on 31 March, you adjust.
  • Year-end bonus declared after reporting date. If the company's policy commits it to pay bonuses for the year just ended, and the bonus is declared in April, this is an adjusting event. The liability existed on 31 March.

Non-Adjusting Events (AKA Disclosed Events)

These are events that occur after the reporting date and do not relate to conditions existing at that date.

Key characteristic: The event is entirely new. It happened because the reporting period ended, not because of something that existed then.

What you do: Do NOT adjust figures. Instead, disclose the event in a note to the financial statements (or in a separate section called "Events After the Reporting Period").

Common examples:

  • Dividend declared and approved after reporting date. This is a classic non-adjusting event. On 31 March, no dividend has been approved; therefore, no liability exists. When the board declares it on 15 April, that is a new event. You do not include it in the 31 March balance sheet. You disclose it in the notes as "Subsequent event—dividend declared Rs X crore."
  • A major asset destroyed after year-end. A factory burns down on 10 April. The factory existed and was fine on 31 March. This is a new misfortune, not evidence of a prior condition. You disclose, don't adjust.
  • Acquisition of another company. If you acquire a business after the reporting date, this is entirely new. Disclose it.
  • A new loan obtained. After 31 March, you borrow money. New event. Disclose.
  • A significant drop in the market value of investments. If an investment you held on 31 March falls sharply in value after the reporting date (and this is due to post-reporting-date market conditions), it is non-adjusting.

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The Dividend Declaration Trap — A Common Exam Mistake

This is where students stumble repeatedly.

Question: On 31 March 2024, your balance sheet shows no dividend payable. On 10 April 2024, the board approves a dividend of Rs 100 crore. Should you adjust the 31 March balance sheet?

Wrong answer: "Yes, because the board has now approved it, so I'll add it as a liability."

Correct answer: No. The approval came after the reporting date. On 31 March, the company had no obligation to pay any dividend. Therefore, there is no adjusting event. You disclose it in the notes.

The rule: Under Ind AS, a dividend is a liability only when it is declared or approved before or on the reporting date. If the declaration/approval happens after, it is non-adjusting.

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A Worked Logic Example

Let's build a scenario:

Situation: Your financial year ends 31 March 2024. The board meets on 20 April 2024.

  • On 5 April: A customer who owed Rs 50 lakhs on 31 March declares bankruptcy. Adjusting or non-adjusting? Adjusting. The debt existed on 31 March; the bankruptcy just confirms it won't be recovered. Reduce receivables and increase bad debt expense.
  • On 12 April: Your company acquires a competitor. Adjusting or non-adjusting? Non-adjusting. This is a new event entirely unrelated to conditions on 31 March. Disclose in notes.
  • On 20 April: The board approves a dividend of Rs 25 crore out of profits earned. Adjusting or non-adjusting? Non-adjusting. No obligation existed on 31 March. Disclose in notes.
  • On 8 April: A court case that was pending on 31 March is settled for Rs 10 crore, confirming a liability that was only estimated at Rs 8 crore on 31 March. Adjusting or non-adjusting? Adjusting. The liability existed; the settlement clarifies the amount. Adjust the provision from Rs 8 crore to Rs 10 crore.

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Key Questions Examiners Love (and Where Mistakes Happen)

Question Type 1: "You find out in April that inventory was obsolete on 31 March. What do you do?" Trap: Students sometimes think it's non-adjusting because you discovered it after year-end. Wrong. The obsolescence existed; adjust.

Question Type 2: "The board declares a bonus in April for the year just ended. Adjust or disclose?" Trap: Students conflate "performance was earned in the year" with "liability exists on 31 March." The bonus wasn't approved or declared on 31 March, so: disclose only.

Question Type 3: "A major order is cancelled after year-end. Is this adjusting?" Trap: No. The order's cancellation is a new event. The customer's decision came after 31 March. Non-adjusting; disclose.

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Quick Checklist

Before you answer an exam question, ask yourself:

✓ Did this event occur after the reporting date? ✓ Does it give us evidence of a condition that already existed on the reporting date?

If yes to both, it is adjusting. Change the numbers. If the event is brand new (no prior condition), it is non-adjusting. Add a note.

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FAQs

Q: If we find out in April that a debtor is bankrupt, but we already made a bad debt provision on 31 March, do we still adjust?

A: Yes. If the April bankruptcy provides additional evidence that the provision should be higher (or lower), adjust accordingly. The underlying condition existed; the event clarifies or quantifies it.

Q: Is a bonus declared in April always non-adjusting?

A: Not always. If the company's accounting policy or a formal agreement committed the company to pay a bonus for that year, and the bonus only needed approval (which came in April), it can be adjusting because the obligation existed. However, if there is no prior commitment and the bonus is discretionary, it is non-adjusting. Check the policy.

Q: What if a financial statement note already mentions a contingent liability on 31 March, and in April a court rules against us?

A: If the court ruling in April provides evidence about the liability that existed on 31 March, you adjust the amount from contingent (disclosed) to recognised (in the balance sheet). The condition existed; the ruling quantifies it.

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Remember: the line between adjusting and non-adjusting is about when the obligation or evidence arose, not when you found out about it. This distinction will save you marks in your exams and help you answer questions confidently.

For deeper practice and worked scenarios, visit our free case-scenario platform at https://caparveensharma.com and download your personalised study planner at https://caparveensharma.com/free-planner?src=article. These tools are designed to help you build strong concepts step by step.