Question

Within IAS 10 Events After the Reporting Period, what is the difference between an adjusting event and a non-adjusting event? Give an example of each type?

Answer 1

As per IAS 10, adjusting and non adjusting events are those favourable or unfavrouble events which occurs between the end of reporting period and the date on which financial statements are approved for issue.

Adjusting Event- An event which occured after the reporting date (period) that provides further evidence of conditions that existed at the end of reporting period. Such adjusting events are required to be adjusted in the currently issued financial statements beacuse they provide additional condition that they exists on the Balance Sheet date. It also includes such events that indicates that the going concern assumption in relation to whole or part of the enterprise ceses.

For Example: Receiving the information of bankruptcy of a debtor after the reporting date which exists as a receivable in the Balance Sheet at the year end and a provision for doubtful debt is also made on such debtor.

Non-adjusting Event- An event which occurs after the reporting date but does not provide and further evidence of condition that it exists on the reporting date. Such events does not require any adjustment in currently issued financial statement. However, a non adjusting event can be disclosed if they are of such important that non-disclosure may affect the ability of user to make proper evaluation and decisions.

For Example: Loss incurred by the entity due to destruction of asset by fire. Also if an entity declares devidends after the reporting period, the entity shall not recognise such dividends as laibilty at the end of reporting period, beacuse it is a non- adjusting event.