Events after the reporting period: adjust or disclose
How to tell adjusting from non-adjusting events after year end, where the cut-off falls, and how late changes reach a draft set of statements in Achekam.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Year end is a date, but the financial statements are not finished on it. Weeks or months pass before they are approved, and in that time the client's world carries on: a debtor goes into liquidation, a court case settles, a warehouse floods, a big contract is signed. Some of those events change the figures. Others only need explaining. Getting the distinction wrong either hides a loss that already existed or books something that belongs to next year.
This article works through the distinction with examples from ordinary client work, explains where the cut-off falls, and shows how a late change reaches the draft in Achekam.
Adjusting and non-adjusting events, with examples from client work
The test is about when the condition arose, not when the news arrived. An event after the reporting period is adjusting if it gives evidence of a condition that existed at year end. It is non-adjusting if it reflects a condition that arose afterwards. IAS 10 sets this out under full IFRS, and IFRS for SMEs carries the same principle in its own section; the IFRS Foundation's summary of IAS 10 explains when statements are adjusted and what must be disclosed about the authorisation date and non-adjusting events.
| Event after year end | Usually | Why |
|---|---|---|
| A major debtor is liquidated, its difficulties pre-dating year end | Adjusting | Evidence the receivable was impaired at year end |
| A court case settles at an amount different from the provision | Adjusting | Confirms an obligation that existed at year end |
| Stock on hand at year end is sold below cost | Adjusting | Evidence of net realisable value at year end |
| A fraud or error affecting the year comes to light | Adjusting | Shows the statements were wrong |
| A fire destroys equipment | Non-adjusting | The loss arose after year end |
| A dividend is declared for the year | Non-adjusting | No obligation existed at year end |
| A large acquisition or new loan facility is signed | Non-adjusting | A new transaction |
| A key customer is lost in a dispute that began after year end | Non-adjusting, unless it threatens going concern | A new condition |
The last row points to the one important exception. If after year end the directors decide to liquidate the company or stop trading, or have no realistic alternative but to do so, the statements should not be prepared on a going concern basis at all, even though the decision came later.
The cut-off: the date the statements are authorised for issue
Events are considered up to the date the statements are authorised for issue, normally the date the directors approve them, and the statements must disclose that date and who gave the authorisation. Two practical consequences:
- The longer the gap between year end and approval, the more there is to consider. A set approved many months after year end needs a much wider enquiry than one approved within weeks.
- An event after the client has approved the draft but before the statements are authorised still counts. That is one reason the client's review on the review link should be close in time to final approval, and why a late change may need fresh approval, as explained in changes after the client approved the draft.
Asking the client what happened after year end
The trial balance cannot tell you about events after year end; the client can. Ask explicitly and in writing, as close to approval as possible. Useful questions:
- Have any customers failed to pay amounts owed at year end, or gone into business rescue or liquidation?
- Have any claims, disputes or legal actions been settled, started or threatened?
- Has any stock been sold below cost or written off since year end?
- Have there been losses from fire, theft, flood or anything similar?
- Has the company declared dividends, issued shares, borrowed, or bought or sold a business?
- Has anything happened that affects the company's ability to keep trading?
In Achekam, staff can send these as a request and track the answers in the RFI console, whichever screen the request was raised from. The answers then sit with the engagement, which is where a reviewer will look for them.
Posting an adjusting entry and rebuilding the draft
When an event is adjusting, the figures change. Staff can post a year-end adjusting entry, and the Studio rebuilds the draft with every figure calculated in code. Any block of text a person edited is kept through the rebuild, so the team's narrative work is not lost, but it does need re-reading: a paragraph written before the adjustment may no longer be accurate.
If an adjusting entry turns out to be wrong, say because the liquidator signals a better recovery before approval, it is reversed with a record of who reversed it and why, never deleted. That trail helps when the client asks why the figure moved twice.
Disclosure wording for non-adjusting events
A material non-adjusting event is disclosed, not booked. The note should say what happened and give an estimate of its financial effect, or state that such an estimate cannot be made. Avoid vague wording such as "certain events occurred"; readers need enough to understand the effect.
Achekam's notes take their figures from the mapped trial balance, and anything the trial balance does not hold is left as "[to be completed]". The note on events after year end is a classic case: its wording has to come from the client's answers. Where nothing happened, say so plainly, and only once the client has confirmed it.
Finally, remember that the set is fixed only when it is issued: issuing stores the final PDF with a fingerprint and locks that version, and anything material before then is in scope. What an auditor does about the same period is covered in the auditor and subsequent events.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
