Events After the Reporting Period (Subsequent Events)
Why something that happens weeks after a company's financial year actually ends can still change the numbers inside financial statements dated for that earlier year-end.
In plain English
Imagine a company's financial year ends on 31 March. Its accountants then spend several weeks preparing the actual financial statements, which the board finally approves for issue on, say, 20 May. What happens if something significant occurs during that gap? A major customer goes bankrupt on 10 April, owing the company a large, now clearly uncollectible amount that was still sitting as a healthy receivable on 31 March. Should the 31 March financial statements reflect this new information, even though the bankruptcy technically happened AFTER the year officially ended? Accounting says: it depends entirely on WHAT KIND of event this is.
Words you'll need first
An event after the reporting period that provides ADDITIONAL EVIDENCE of conditions that already existed AT the balance sheet date itself. The customer bankruptcy example fits here if the customer was already in serious financial distress before year-end. Adjusting events require the financial statements THEMSELVES to be updated to reflect this new information, even though the statements are dated for the earlier year-end.
An event after the reporting period that reflects conditions arising AFTER the balance sheet date — genuinely new developments, not confirmation of something that already existed. A major fire destroying a factory, or a large new acquisition, simply hadn't happened yet as of the year-end. Non-adjusting events do NOT change the actual financial statement figures — but if material, they must be DISCLOSED in the notes.
A worked example, with numbers
| Event | Classification | Impact on the 31 March financial statements |
|---|---|---|
| Customer bankruptcy (distress existed before year-end) | Adjusting Event | Write off the ₹40 crore receivable IN the 31 March accounts themselves |
| Supplier factory fire (unrelated, new event) | Non-Adjusting Event | No change to figures; disclosed as a note |
| Combined effect on reported 31 March position | — | Numbers reflect only the adjusting event; the fire is described but not quantified |
- Even though the bankruptcy was formally filed on 10 April, the ₹40 crore write-off is recognised IN the 31 March accounts themselves — because the customer's distress already existed on the balance sheet date; the filing is simply confirming evidence arriving later.
- The factory fire, by contrast, is a genuinely NEW event that had nothing to do with anything existing as of 31 March — no matter how significant its future impact might be, it cannot be built into the 31 March numbers themselves.
- The fire still has to be disclosed, though, if material — a note explaining what happened and management's best estimate of the potential financial effect.
- This distinction matters enormously for events like the COVID-19 pandemic for companies with a 31 March 2020 year-end: much of its impact was a non-adjusting, disclosure-only matter for that specific year-end, even though it clearly, profoundly affected ongoing operations from that point forward.
What it does to the financial statements
Impact on the P&L
- Adjusting events directly change P&L figures within the financial statements being prepared, even though the underlying event's formal confirmation arrived after the year-end date.
- Non-adjusting events, however large or significant, never change reported profit or loss for the period just ended — their financial effect, if any, will show up in the FOLLOWING period's results instead.
- The gap between a company's year-end date and the date its board actually approves the financial statements can sometimes be several weeks or months — a genuinely important window during which management must actively monitor for exactly this kind of event.
- Dividends declared AFTER year-end, in relation to that just-ended year's profit, are treated as a non-adjusting event under Ind AS 10 — they don't create a liability in the just-ended year's accounts.
Impact on the Balance Sheet
- Adjusting events change the balance sheet figures reported for the year-end date itself — assets, liabilities, and equity as reported ARE different because of information that arrived after that date but relates to conditions that existed on it.
- Non-adjusting events leave the reported balance sheet figures for the year-end date completely untouched.
- The 'going concern' assessment must specifically consider events after the reporting period too; if a post-year-end event raises serious doubt about the company's ability to continue as a going concern, this can require a fundamental change in how the ENTIRE set of financial statements is prepared.
- Companies with a longer gap between year-end and approval date face a longer window of potential events requiring this kind of careful classification and disclosure.
Which standard covers this
In India this is governed by Ind AS 10 – Events after the Reporting Period, notified under the Companies (Indian Accounting Standards) Rules and applicable to companies that follow Ind AS, setting out the adjusting/non-adjusting classification and disclosure requirements.
How it's recognised globally
Globally, the equivalent is IAS 10, and Ind AS 10 mirrors its adjusting/non-adjusting classification framework closely. Under US GAAP, equivalent guidance sits in ASC 855, sharing broadly the same core concepts (referred to as 'recognized' and 'non-recognized' subsequent events), though US GAAP has historically required companies to specifically disclose the DATE through which subsequent events were evaluated — a specific procedural disclosure not identically mirrored in the IFRS/Ind AS framework, though the underlying substance is very closely aligned.
Real example — Indian listed company
The onset of the COVID-19 pandemic provided an extraordinarily widespread, real-world illustration of this concept across virtually every Indian listed company with a 31 March 2020 year-end. India's national lockdown was announced on 24 March 2020, just days before most companies' year-end, and most companies' financial statements were actually approved by their boards in the following weeks and months, well into the unfolding pandemic. This created a genuinely widespread, real-time test of the adjusting/non-adjusting distinction: companies had to judge which pandemic-related impacts reflected conditions that already existed at 31 March 2020 versus impacts genuinely still unfolding as the lockdown extended into April and beyond. The resulting annual reports across corporate India for that year are filled with extensive 'events after the reporting period' and COVID-19-specific disclosure notes, making FY2019-20 one of the most instructive real-world periods in recent Indian accounting history for observing exactly how this standard works in practice.
Where you'll see this
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