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 Ind AS 10
Events after the Reporting Period

INTRODUCTION

Events after the reporting period are those events, favourable (the events that will lead to the inflow of economic
benefits, which could be in the form of more profits, revenue or assets for the entity) and unfavourable (the event
that will lead to a loss), that occur between the end of the reporting period and the date when the financial
statements are approved by the Board of Directors in case of a company, and, by the corresponding approving
authority in case of any other entity for issue.

Normally, there is a time gap between the end of a reporting period and the date when the financial statements are
published in order to enable the users to interpret the same. During this time gap, an entity continues with its
activities. It may so happen that a significant event occurs which needs to be a part of the complete set of financial
statements awaiting to be authorised by the board of directors for issue. The significant event might be in the form
of an adjustment or a disclosure in the notes to financial statements.

FINANCIAL
STATEMENTS
END OF REPORTING AUTHORISED FOR
PERIOD ISSUE

MARCH EVENT JUNE

31, 20XX 15, 20XX

EXAMPLE 1

For copyright infringement, ABC Ltd was awarded damages by the court, after it sued XYZ Ltd. The event
ensures the inflow of economic benefits to the entity in the form of compensation for damages that it had
suffered. Therefore, the event is a favourable one for ABC Ltd.

EXAMPLE 2

ABC Ltd had sold its finished goods to XYZ Ltd for an amount of ₹ 10, which XYZ Ltd used as a raw material.
After the reporting period, it is found that ABC Ltd would not be able to get the entire amount owing, as XYZ
Ltd becomes bankrupt. This event is an unfavourable one since it requires ABC Ltd to make a full provision of
the amount owing from XYZ Ltd.

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DATE OF AUTHORISATION OF ISSUE

Events occurring after the reporting period may provide additional information about events that occurred before
and up to the end of the reporting period. These events might not affect the figures reported in the financial
statements but may warrant disclosures. Therefore, when financial statements are prepared, one needs to consider
events that occur after the reporting period until a certain cut-off date, which is the date of board authorisation for
the issue of the financial statements.

The cut-off date is the end of the post reporting period. Establishing this date is necessary to comply with the
standard. The process involved in authorising the financial statements for issue will vary depending upon the
following –

 Management structure;
 Statutory requirements; and
 Procedures followed in preparing and finalising the financial statements.

When an entity is obliged to submit its financial statements to its shareholders for approval after they are issued,
the financial statements are considered authorised for release on the date of issuance and not the date when
shareholders will give their approval.

EXAMPLE 3

The financial statements of an entity were prepared for the reporting period ended 31 March 20x4 on 15 May
20x4. The draft financial statements were considered at the meeting of the board of directors held on 25 May
20x4, on which date the board approved them and authorised for issuance. The Annual General Meeting was
held on 12 June 20x4 where the shareholders approved the financial statements. These were filed by the
company with the Statutory Board on 15 June 20x4. Here, the approval date is 25 May 20x4 when the board
approved them for issue. Thus, all post reporting period events between 1 April 20x4 and 25 May 20x4 need to
be considered for evaluating whether they are to be accounted or reported under Ind AS 10.

EXAMPLE 4

The management of XYZ Ltd issued the draft financial statements to the supervisory board on 20 April 20x5.
The supervisory board approved them on 22 April 20x5. Thereafter, the shareholders approved them in the
Annual General Meeting held on 15 May 20x5. The approved financial statements were filed with the Statutory
Board on 25 May 20x5. In this case, the date of approval is 20 April 20x5.

Events after the reporting period include all the events up to date when the financial statements are authorised for
issue, even if those events occur after the public announcement of profit or of other selected financial information.

RECOGNITION AND MEASUREMENT

The nature and circumstances of all post reporting events should be material so that users of the financial
statements are made aware of them. This Standard divides the events after the reporting period into two categories
namely adjusting events and non-adjusting events after the reporting period.

Accounting for these types of events is summarised in the following diagram:

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 ADJUSTING EVENTS
Provides evidence of conditions Financial statements for period
that existed at the end of just ended
reporting period
Adjust
Events Occuring After the
Reporting Date
NON-ADJUSTING EVENTS
Indicative of conditions that Nature of financial effect of
arose after reporting date material non-adjusting events
Disclose

Adjusting events after the reporting period

Adjusting events after the reporting period are those events that provide evidence of conditions that existed at the
end of the reporting period. In order to reflect adjusting events after the reporting period, an entity shall adjust the
amounts already recognised in its financial statements, or is required to recognise items that were not previously
recognised:

o The settlement after the reporting period of a court case that confirms that an entity had a present obligation
at the end of the reporting period. The entity either –

 adjusts any previously recognised provision related to this court case in accordance with Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets; or
 recognises a new provision.

The entity shall not merely disclose a contingent liability because the settlement provides additional
evidence in the form of ‘opinion of experts’ as described in Ind AS 37 Provisions, Contingent Liabilities and
Contingent Assets.

EXAMPLE 5

A customer had filed a suit against an entity in the year 20x3 and a corresponding contingent liability was
disclosed. The entity prepared the financial statements for the period ended on 31 March 20x5. In April 20x5,
the court case settled resulting in an obligation for the entity. The financial statements were authorised for
issue on 25 May 20x5. Though the court case was filed by the customer in 20x3, the company had not recorded
any liability then because it was not certain about the result. This is an adjusting event after the reporting date
and, therefore, a new provision as per Ind AS 37 is to be recognised.

The receipt of information after the reporting period indicating that an asset was impaired at the end of the
reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted.

EXAMPLE 6

The bankruptcy of a customer that occurs after the reporting period usually confirms that a loss existed at the
end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the
trade receivable.

An entity prepared its financial statements for the reporting period ended 31 March 20x4. In May 20x4, the
company received a liquidator’s notice indicating that the amount of ₹ 10 due from a customer would be
irrecoverable. The financial statements were authorised for issue on 30 June 20x4. The fact is that the
irrecoverable debt was in existence at the reporting period, but the problem of its collection was not yet known

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 to the company. The receipt of the notice represents an event after the reporting period and it provides
additional information to the company on the status of the debt at the reporting date. This is an adjusting event
and the company has to make full provision for the amount outstanding to reflect the most up-to-date status of
the debt in the financial statements.

EXAMPLE 7

The sale of inventories after the reporting period may give evidence about their net realisable value at the end of
the reporting period.

An entity carries its inventory at the lower of cost and net realisable value. At 31 March 20x4 the cost of
inventory, determined under FIFO method, as reported in its financial statements for the period then ended, was
₹ 20. Due to recession in the market, the inventory could not be sold during April 20x4. The company entered
into an agreement to sell the entire inventory for ₹ 14. The financial statements were authorised for issuance on
15 May 20x4. This is an adjusting event. The entity should recognise a write-down of ₹ 6 in financial statements
for the reporting period ended 31 March 20x4.

EXAMPLE 8

An entity closes its books of account on 31 March 20x4. The entity had agreed to sell an asset to another entity on
20 March 20x4. The price of the asset was, however, determined on 15 April 20x4, ie, after the reporting date.
The financial statements were authorised for issue on 15 May 20x4. Therefore, the determination of the price is
an adjusting event and need to be taken into account in the financial statements.

Non-Adjusting events after the reporting period

Non -adjusting events after the reporting period are those events that are indicator of conditions that arose after
the reporting period. In order to reflect the non-adjusting events after the reporting period, an entity shall not
adjust the amounts recognised in the financial statements. Instead, it shall provide specific disclosures considering
the materiality of the event that has occurred.

EXAMPLE 9

An entity has investments worth ₹ 10 that is recognised in Balance Sheet. Between the end of the reporting
period and the date when the financial statements are authorised for issue, there was a decline in the market
value of the investments. The decline does not normally relate to the condition of the investments at the end of
the reporting period, but reflects circumstances that have arisen subsequently. Therefore, the entity does not
adjust the amounts recognised in its financial statements for the investments, rather gives additional
disclosures if the information is material enough.

EXAMPLE 10

The reporting period of an entity ends on 31 March 20x5. The financial statements were authorised for issue on
15 May 20x5. On 15 April 20x5, the company was sued by a customer who claimed that the goods supplied in
December 20x4 were sub-standard. Based on the advice of the company’s legal counsel, it was quite likely that
the customer would receive compensation from the entity. This is a non-adjusting event. The entity should
disclose the event in the notes to the financial statements.

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EXAMPLE 11

The destruction of inventory by fire, after the end of the reporting period but before the date of authorisation
for issue, would be a non-adjusting event. It would not justify writing down that inventory to a nil net present
value in the financial statements being prepared, since it reflects circumstances that occurred in the following
period.

DIVIDEND

If an entity declares dividends to holders of equity instruments after the reporting period but before the financial
statements are authorised for issue, the entity shall not recognise those dividends as a liability at the end of the
reporting period. It is because, they do not meet the criteria of a present obligation as per Ind AS 37. In addition, an
entity’s past practice of paying dividends cannot be considered a constructive obligation as such practices do not
give rise to a liability to pay dividends. Therefore, the very concept of proposed dividend now disappears from the
financial statements. Such dividends are disclosed in the notes in accordance with Ind AS 1 Presentation of
Financial Statements.

Share Capital Retained earnings

(A) (B)
Balance bf (1 April 20xx) 6,000 675
Profit for the period 1,065
Other comprehensive income recognised
Other comprehensive income derecognised
Other comprehensive income (net)
Transferred to retained earnings 24
Payment of dividends (80)

Balance cf (31 March 20xx) 6,000 1,684

GOING CONCERN

The going concern is the assumption that the entity has neither the intention, nor the need to liquidate, or curtail
materially the scale of its operation. An entity shall not prepare its financial statements on a going concern basis if
the management determines after the reporting period either that it intends to liquidate the entity, cease trading
or it has no realistic alternative but to do so.

Deterioration in operating results and financial position after the reporting period may indicate a need to consider
whether the going concern assumption is still appropriate. If the going concern is inappropriate, the effect is so
pervasive that this standard requires an entity to make a fundamental change in the basis of accounting, rather
than an adjustment to the amounts recognised within the original basis of accounting.

As per Ind AS 1 Presentation of Financial Statements, specific disclosures are required if –

 the financial statements are not prepared on a going concern basis; or

 management is aware of material uncertainties related to events or conditions that may cast significant doubt
upon the entity’s ability to continue as a going concern. The events or conditions requiring disclosures may arise
after the reporting period.

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EXAMPLE 12

An entity is preparing its financial statements for the year ended 31 March 20x4. In April 20x4, a major
earthquake occurred and the whole plant of the entity was destroyed. A natural disaster of this kind is not
covered by insurance policy taken out by the entity. To restart the business, the entity failed to raise adequate
capital and, therefore, decided to close down the whole operation. Therefore, the financial statements to March
20x4 should be prepared on a liquidation basis, not on a going concern basis.

DISCLOSURE

Date of approval for Issue

An entity shall disclose the date when the financial statements were authorised for issue and who gave that
authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the
entity shall disclose that fact. It is important for users to know at which point in time the financial statements were
authorised for issue, since the financial statements do not reflect events after this date.

EXAMPLE 13

Notes to the financial statements of ABC Ltd will include the following :

The financial statements for the year ended as on 31 March 20x4, have been approved for issue with a resolution
by the Board of Directors on 15 April 20x4.

Updating disclosure about conditions at the end of the reporting period

If an entity receives information after the reporting period about conditions that existed at the end of the reporting
period, it shall update disclosures that relate to those conditions, in the light of the new information. An entity shall
update the disclosures, irrespective of any adjustments made to the amounts that are recognised in its financial
statements.

EXAMPLE 14

An entity has a contingent liability in its financial statements on 31 March 20x4. An evidence is available
relating to this contingent liability after the reporting period and before the approval of the financial
statements. In addition to considering whether the entity should recognise a provision as per Ind AS 37, the
entity should update its disclosures about the contingent liability in the light of that evidence.

Non-adjusting events after the reporting period

If non-adjusting events after the reporting period are material, non-disclosure could influence the economic
decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following
for each material category of non-adjusting event after reporting period –

 The nature of the event; and

 An estimate of its financial effect, or a statement that such an estimate cannot be made.

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EXAMPLE 15

ABC Ltd closed its financial statements on 31 March 20x4. On 1 April 20x4, an office building with a net book
value of ₹ 100 was severely damaged by earthquake. It is expected that the insurance company will
compensate for the claim but still the proceed will fall short by ₹ 50. The company needs to give disclosure
regarding this non-adjusting event specifying its nature as well as an estimate of the financial effect.

EXAMPLE 16

ABC Ltd is having negotiations with the government for the expropriation of a plot of land by the latter on
which a part of the factory is situated. The financial effect of this has to be disclosed in the notes. If an
estimate of its financial effect cannot be made, disclosure should be made through a statement.

EXAMPLE 17

ABC Ltd closes its financial statements on 31 March 20x4. On 17 April 20x4, the company announced its
intension to acquire XYZ Ltd for a consideration of ₹ 100. The transaction is yet to be approved by ABC Ltd’s
shareholders. The acquisition is expected to be completed by the end of September 20x4. This is a non-
adjusting event which needs to be disclosed.

Examples of non-adjusting events after the reporting period that would generally result
in disclosure

 A major business combination after the reporting period as per Ind AS 103 or disposing of a major subsidiary;
 Announcing a plan to discontinue an operation;
 Major purchases of assets, classification of assets as held for sale in accordance with Ind AS 105, other
disposals of assets, or expropriation of major assets by governments;
 The destruction of major production plant by a fire after the reporting period;
 Announcing, or commencing the implementation of, a major restructuring as per Ind AS 37;
 Major ordinary share transactions and potential ordinary share transactions after the reporting period;
 Abnormally large changes after the reporting period in asset prices or foreign exchange rates;
 Changes in tax rates or tax laws enacted or announced after the reporting period that have a significant
effect on current and deferred tax assets and liabilities as per Ind AS 12 Income Taxes;
 Entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees;
 Commencing major litigation arising solely out of events that occurred after the reporting period.

EXAMPLE 18

For ABC Ltd, the income tax rate is 30%. A new income tax rate of 35% is enacted after the reporting period
but before the date the financial statements were authorised for issue. If the effect of the new tax rate has
material effect on deferred tax liabilities and deferred tax assets, the company shall disclose details of the
changes in the income tax rate and its related effect on the company.

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