Last updated 23rd Sep 2022
The financial accounting term post balance sheet events refers to the disclosure of transactions and events occurring after the date of the balance sheet, but before the financial statements of the company have been issued to the public.
Explanation
Post balance sheet events, also known as subsequent events, are one of several types of information that is supplementary to the items appearing on a company's balance sheet. It can often take weeks after the close of an accounting period until the data is assembled into a financial statement. If materially significant information is gained during that time, disclosure is required. Generally, there are two categories of events or transactions that occur after the balance sheet date that can have a material effect on financial statements and need to be disclosed:
- Events Requiring Adjustment: includes conditions that existed at the balance sheet date that affect the estimates used in the preparation of the company's financial reports. If material, these events require an adjustment to the company's financial statements. For example, the company may have estimated inventory and receivables at a certain level at yearend, but a positive review on a popular website resulted in an unexpected spike in sales.
- Events Requiring Disclosure: includes conditions that did not exist at the balance sheet date but have a material effect on the financial condition of the company. These events should be addressed either through notes, supplementary tables of data or even pro-forma statements. For example, the company may have acquired another business, settled a lawsuit, or experienced a significant loss or gain on marketable securities.
Related Terms
gain and loss contingencies, contracts and negotiations, valuations and accounting policies, financial statements
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IAS 10 Events After The Reporting Period contains requirements for when events after the end of the reporting period should be adjusted in the financial statements. Adjusting events are those providing evidence of conditions existing at the end of the reporting period, whereas non-adjusting events are indicative of conditions arising after the reporting period (the latter being disclosed where material).
IAS 10 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.
| July 1977 | Exposure Draft E10 Contingencies and Events Occurring After the Balance Sheet Date |
| October 1978 | IAS 10 Contingencies and Events Occurring After the Balance Sheet Date effective 1 January 1980 |
| 1994 | IAS 10 (1978) was reformatted |
| August 1997 | Exposure Draft E59 Provisions, Contingent Liabilities and Contingent Assets |
| September 1998 | IAS 37 Provisions, Contingent Liabilities and Contingent Assets |
| 1 July 1999 | Effective date of IAS 37, which superseded those portions of IAS 10 (1978) dealing with contingencies |
| November 1998 | Exposure Draft E63 Events After the Balance Sheet Date |
| May 1999 | IAS 10 (1999) Events After the Balance Sheet Date superseded those portions of IAS 10 (1978) dealing with events after the balance sheet date |
| 1 January 2000 | Effective date of IAS 10 (1999) |
| 18 December 2003 | Revised version of IAS 10 issued by the IASB |
| 1 January 2005 | Effective date of IAS 10 (Revised 2003) |
| 6 September 2007 | Retitled Events after the Reporting Period as a consequential amendment resulting from revisions to IAS 1 |
Event after the reporting period: An event, which could be favourable or unfavourable, that occurs between the end of the reporting period and the date that the financial statements are authorised for issue. [IAS 10.3]
Adjusting event: An event after the reporting period that provides further evidence of conditions that existed at the end of the reporting period, including an event that indicates that the going concern assumption in relation to the whole or part of the enterprise is not appropriate. [IAS 10.3]
Non-adjusting event: An event after the reporting period that is indicative of a condition that arose after the end of the reporting period. [IAS 10.3]
- Adjust financial statements for adjusting events - events after the balance sheet date that provide further evidence of conditions that existed at the end of the reporting period, including events that indicate that the going concern assumption in relation to the whole or part of the enterprise is not appropriate. [IAS 10.8]
- Do not adjust for non-adjusting events - events or conditions that arose after the end of the reporting period. [IAS 10.10]
- If an entity declares dividends after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period. That is a non-adjusting event. [IAS 10.12]
An entity shall not prepare its financial statements on a going concern basis if management determines after the end of the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so. [IAS 10.14]
Non-adjusting events should be disclosed if they are of such importance that non-disclosure would affect the ability of users to make proper evaluations and decisions. The required disclosure is (a) the nature of the event and (b) an estimate of its financial effect or a statement that a reasonable estimate of the effect cannot be made. [IAS 10.21]
A company should update disclosures that relate to conditions that existed at the end of the reporting period to reflect any new information that it receives after the reporting period about those conditions. [IAS 10.19]
Companies must disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the enterprise's owners or others have the power to amend the financial statements after issuance, the enterprise must disclose that fact. [IAS 10.17]