What Is an Adjusting Event Under IAS 10?

An adjusting event, under IAS 10, is an event after the reporting period that provides evidence of conditions that already existed at the reporting date. Because the condition existed at the year end, the financial statements are adjusted to reflect it. This contrasts with a non-adjusting event, which relates to conditions arising after the year end.

Examples of adjusting events

• The settlement of a court case after the year end that confirms an obligation existed at the reporting date.
• The bankruptcy of a customer after the year end, confirming a receivable was impaired at the year end.
• The sale of inventory after the year end for less than cost, giving evidence of its net realisable value at the reporting date.
• The discovery of fraud or error showing the statements were misstated.

Adjusting versus non-adjusting

The test is whether the condition existed at the reporting date. If it did, adjust the statements. If it arose afterwards — a fire destroying a warehouse after the year end, for instance — it's non-adjusting, and you only disclose it if it's material.

A special case: going concern

If events after the reporting period indicate the going-concern assumption is no longer appropriate, the financial statements must be adjusted regardless — this is treated differently from an ordinary non-adjusting event.

IAS 10 is regularly tested in ACCA FR, and the marks come from correctly classifying the event and stating the treatment. Practising these questions and marking them against the official ACCA scheme with The 50% Club shows you exactly where your judgement slips — so you can secure the marks.