Ind AS 10 requires an entity to distinguish between two kinds of event occurring after the balance sheet date but before the financial statements are approved for issue: adjusting events, which provide evidence of conditions that existed AT the balance sheet date and therefore require the financial statements themselves to be adjusted, and non-adjusting events, which are indicative of conditions arising AFTER the balance sheet date and are disclosed in the notes rather than adjusted into the figures. The classification question is always "did the condition exist at the balance sheet date," never "did the event happen before the report was signed" — a subtle but consequential distinction.
Worked examples of each
| Event | Classification | Why |
|---|---|---|
| A customer's bankruptcy, filed after year end, for a receivable outstanding at year end | Adjusting | Confirms the receivable was already impaired — the customer's deteriorating financial condition existed at the balance sheet date |
| Discovery of fraud or error that shows the financial statements were incorrect | Adjusting | The error existed at the balance sheet date; its discovery afterward doesn't change when the condition arose |
| A decline in market value of investments after year end | Non-adjusting | Reflects circumstances arising after the balance sheet date, not a condition existing at it |
| A major business combination or disposal after year end | Non-adjusting | A new event, not evidence of something that already existed |
| A natural disaster destroying a major asset after year end | Non-adjusting | The destruction is a new event; the asset existed and was presumably functioning at the balance sheet date itself |
Two specific rules the standard calls out directly
- 01Dividends declared after the reporting periodNot recognised as a liability at the balance sheet date, even if declared before the financial statements are approved — because the obligation didn't exist at the reporting date. Disclosed in the notes, not recognised on the balance sheet.
- 02Going concern basis affected by a post-year-end eventIf management determines after the reporting date that it intends to liquidate the entity, or has no realistic alternative, Ind AS 10 requires NOT preparing the financial statements on a going-concern basis at all — a fundamentally different outcome from simply disclosing a non-adjusting event, and the most serious application of the standard.
Regulatory requirement
A material non-adjusting event's disclosure must include the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made — a one-line mention with no financial context does not satisfy the standard's disclosure requirement.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 560: subsequent events, and the three periods the standard treats differentlyThe auditor's responsibility for subsequent events doesn't end on one fixed date. It changes shape across three separate windows, each with a different obligation.
- Audit documentationInd AS 1: presentation of financial statements, and what a complete set actually requiresFour statements plus notes isn't optional structure — Ind AS 1 defines exactly what counts as a complete set, and a financial statement missing one piece isn't compliant regardless of how good the other three look.
- Audit workflow & automationSA 570: going concern, and when it actually changes the audit reportMost going-concern evaluations end exactly where they should: no material uncertainty, no change to the report. The standard is about the minority of cases where that's not true.
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