Introduction

In this guide the Corporate Reporting Faculty summarises the requirements under IFRS Accounting standards relating to events after the end of the reporting period (hereafter referred to as "post balance sheet events") and considers how entities might distinguish between adjusting and non-adjusting post balance sheet events. The relevant requirements relating to post balance sheet events are contained in IAS 10 Events after the Reporting Period.

This guide is primarily aimed at those entities preparing accounts under IFRS Accounting Standards. It also considers the requirements of the IFRS for SMEs® Accounting Standard. It does not cover disclosures in other reports that might accompany the accounts.

Post balance sheet events - a recap

A fundamental principle in the preparation of accounts is that they should reflect the conditions that existed at the balance sheet date (IAS 1.10).

When preparing accounts, consideration must also be given to events which occur between the balance sheet date and the date when the accounts are authorised for issue (IAS 10.3 and 10.7). While the process involved in authorising the financial statements for issue may vary depending on the jurisdiction, it is likely to be when the accounts are approved by the board of directors and signed on behalf of the board by a director of the company.

Information which comes to light after the balance sheet date that provides evidence of conditions that existed at the balance sheet date (adjusting post-balance sheet events) should be reflected in amounts recognised in the accounts (IAS 10.3 and 10.8).

Information indicative of conditions that arose after the balance sheet date (non-adjusting post balance sheet events) should be disclosed when material. This disclosure should include information on the nature of the event, and an estimate of its financial effect or a statement that such an estimate cannot be made (IAS 10.3 and 10.21).

Adjusting or non-adjusting

Significant judgement may be needed to determine the conditions that existed at the balance sheet date (IAS 10.3) and whether, therefore, the amounts recognised in the accounts need to be adjusted. This judgement will be heavily dependent on the balance sheet date in question, the entity’s own individual circumstances, and the particular events under consideration.

When significant judgement has been applied in determining whether a post balance sheet event is adjusting or non-adjusting, this must be disclosed (IAS 1.122).

Factors to consider

Entities will need to identify the event(s) that they consider relevant to their individual circumstances and assess whether it reflects conditions at the balance sheet date. As the Financial Reporting Council (FRC) describes in its COVID-19 guidance (see Other Resources below) – does the event shine a brighter light on conditions (at the balance sheet date) or did conditions change after the balance sheet date?

When making judgements about conditions that existed at the balance sheet date, entities will need to use all available information about the nature and timing of events. For example, consideration might be given to the impact of:

• Changes in selling prices after the end of the reporting period which may give evidence about the valuation of inventory at the balance sheet date.
• Information about the bankruptcy of a customer after the end of the reporting period which may give evidence about the valuation of trade receivables at the balance sheet date.

Global conflict

Consideration will need to be given to the changing circumstances relating to overseas conflict. Factors might include:

• locations of conflict and impact on the entity’s ability to trade with organisations or individuals in affected areas;
• the entity's ability for entities to access assets in areas affected by the war; or
• sanctions being imposed on organisations or individuals to which the entity is linked.

Implications for forecasting

Forecasting future income and cash flows is important when valuing certain items in the accounts, for example when estimating recoverable amounts. With the exception of going concern assessments, the estimated future cash flows must be based on conditions that existed at the balance sheet date, taking into account expectations as at that date about possible variations in the amount or timing of those future cash flows. Therefore, the estimation of a recoverable amount might be very different for the same asset if the calculation was performed for a 31 December 2024 year end and say, a 31 March 2025 year end. Where there are substantial changes in the economic and/or geopolitical environment, judging whether an event is adjusting or non-adjusting will be particularly significant.

Going concern

A review of post balance sheet events is also important when assessing the basis on which the accounts are prepared. In accordance with IAS 1.25 and IAS 10.14, entities are not permitted to prepare accounts on a going concern basis if management has determined after the balance sheet date that it either intends to:

• liquidate the entity; or
• cease trading, or it has no realistic alternative but to do so.

IAS 10 states that a deterioration in operating results and financial position after the balance sheet date may indicate a need to consider whether the going concern assumption is still appropriate (IAS 10.15).

If management concludes that the entity is a going concern, but is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, details of those uncertainties must be disclosed in the accounts (IAS1.25).

If management determines that the going concern assumption is no longer appropriate, IAS 1 considers the effect to be so pervasive that a fundamental change in the basis of accounting is required ie, the accounts must not be prepared on the going concern basis.

When the accounts have not been prepared on the going concern basis, entities are required to disclose that fact, together with the basis on which the accounts have been prepared, and the reason why the entity is not regarded as a going concern (IAS1.25). IAS 1 does not specify the basis on which the accounts should be prepared, when not prepared on the going concern basis. 

Applying the IFRS for SMEs Accounting standard

The requirements of Section 32 Events after the End of the Reporting Period of the IFRS for SMEs mirror those in IAS 10. When significant judgement has been applied in determining whether a post balance sheet event is adjusting or non-adjusting, this also must be disclosed (Section 8.6).

Further ICAEW resources

For more information about related topics, ICAEW members and Corporate Reporting Faculty subscribers can access the following guides:

• Planning for the 2024/25 reporting season
• Going concern considerations – a guide for IFRS reporters
• Judgements and estimates
• How high inflation impacts accounting

ICAEW members, affiliates or members of staff in an eligible firm with member firm access may also discuss their specific situation with the Technical Advisory Service. The telephone helpline can be contacted on +44 (0) 1908 248 250. Live web chat is also available.

Other resources

The FRC published an updated guide on Going Concern in February 2025, which brings together requirements and provides practical guidance:

• Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks)

Guidance contained in the following documents, issued by the FRC during the COVID-19 pandemic in 2020, remains relevant due to the high levels of uncertainty that companies continue to face:

• FRC guidance: Consolidated covid-19 guidance for companies and auditors