Events after the reporting period (also called post balance sheet events) are events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are authorised for issue. Under FRS 102 Section 32, companies must consider whether these events require adjustments to the financial statements or disclosure in the notes.
For a company with a 31 March year end, if the accounts are signed by the directors on 15 July, any significant events occurring between 1 April and 15 July must be evaluated.
Adjusting vs Non-Adjusting Events
FRS 102 draws a critical distinction between two types of post balance sheet event:
| Type | Definition | Accounting treatment |
|---|---|---|
| Adjusting event | Provides evidence of conditions that existed at the balance sheet date | Adjust the figures in the financial statements |
| Non-adjusting event | Relates to conditions that arose after the balance sheet date | Disclose in the notes if material; do not adjust the figures |
The key question is: did the condition that gave rise to the event already exist at the balance sheet date?
Adjusting Events
An adjusting event provides additional information about conditions that existed at the reporting date. The financial statements must be updated to reflect this information.
Common Examples
| Event | Why it is adjusting |
|---|---|
| A customer goes into administration after the year end, confirming that the debt was doubtful at the balance sheet date | The impaired credit quality existed at the year end |
| Settlement of a court case confirming a liability that was a provision at year end | The obligation existed at the balance sheet date |
| Discovery of fraud or errors that show the financial statements were incorrect | The misstatement existed at the year end |
| Sale of inventory after the year end for less than its carrying value | Confirms that net realisable value was below cost at the year end |
| Agreement of an insurance claim relating to an event before the year end | Determines the amount receivable for a pre-year-end event |
| Determination of the purchase price of an asset bought before the year end | Provides evidence of the cost that existed at the year end |
Worked Example: Bad Debt
A company has a year end of 31 December. On 15 February the following year, a customer owing £35,000 is placed into liquidation by its creditors. The company’s credit control team had flagged the account as slow-paying at the year end.
Since the customer’s financial difficulties existed at the balance sheet date, this is an adjusting event. The company should:
- Recognise a bad debt expense (or increase the doubtful debt provision) of £35,000
- Reduce trade debtors on the balance sheet by £35,000
- Reduce profit before tax by £35,000
Non-Adjusting Events
A non-adjusting event relates to conditions that arose after the balance sheet date. The financial statements are not adjusted, but if the event is material, it must be disclosed in the notes.
Common Examples
| Event | Why it is non-adjusting |
|---|---|
| Major acquisition or disposal of a business after the year end | The transaction occurred after the reporting date |
| Decline in market value of investments after the year end | The market conditions changed after the balance sheet date |
| Destruction of a major asset by fire or flood | The physical event occurred after the year end |
| Announcement of a restructuring plan | The decision was made after the reporting date |
| Major new borrowing or equity issue | The financing arrangement is a post-year-end event |
| Unusually large changes in asset prices or foreign exchange rates | The conditions arose after the balance sheet date |
| New litigation arising from events after the year end | The triggering event occurred after the reporting date |
Disclosure of Non-Adjusting Events
For each material non-adjusting event, the notes must disclose:
- The nature of the event
- An estimate of the financial effect, or a statement that such an estimate cannot be made
Going Concern Considerations
Events after the reporting period may indicate that the going concern assumption is no longer appropriate. If management determines after the balance sheet date that it intends to liquidate or cease trading, or has no realistic alternative, the financial statements must not be prepared on a going concern basis. This is an exception to the general rule that non-adjusting events do not change the figures.
| Scenario | Treatment |
|---|---|
| Post-year-end loss of a major contract, threatening viability | May require departure from going concern basis |
| Bank withdraws overdraft facility after year end | Assess whether the company can continue without it |
| Major customer becomes insolvent after year end | Assess impact on cash flow and ability to continue trading |
This assessment links directly to the year-end accounts preparation process, where directors must formally consider going concern.
Dividends
Dividends declared after the balance sheet date but before the accounts are authorised for issue are non-adjusting events. Under FRS 102, they are not recognised as a liability at the balance sheet date because no obligation exists at that date. Instead, they are disclosed in the notes.
Dividends declared before the balance sheet date (interim dividends already paid, or final dividends approved before the year end) are recognised as a liability.
| Timing | Treatment |
|---|---|
| Dividend declared and paid before year end | Recognised as a deduction from equity |
| Dividend declared after year end | Disclosed in notes only, not recognised as a liability |
The Authorisation Date
The date on which the financial statements are authorised for issue is the cut-off for assessing post balance sheet events. For UK companies, this is typically the date on which the board of directors approves the accounts.
FRS 102 requires disclosure of:
- The date the financial statements were authorised for issue
- Who gave that authorisation
Events occurring after the authorisation date are not reflected in or disclosed in the financial statements, even if they are known before the accounts are filed at Companies House.
Practical Timeline
| Date | Event |
|---|---|
| 31 March | Balance sheet date (year end) |
| 1 April - 30 June | Post balance sheet event period: all significant events must be evaluated |
| 30 June | Board approves the financial statements (authorisation date) |
| 31 December | Filing deadline at Companies House (nine months after year end for private companies) |
Events between 30 June and 31 December are not post balance sheet events for the 31 March accounts because they occur after the authorisation date.
Audit Implications
Auditors are required to perform procedures to identify events after the reporting period up to the date of the auditor’s report. These procedures include:
- Reviewing minutes of board meetings held after the year end
- Reviewing the latest management accounts and interim financial information
- Inquiring of management about significant events, new commitments, borrowings, or guarantees
- Reviewing correspondence with solicitors regarding litigation
If a material event is identified after the auditor’s report is signed but before the accounts are filed, the auditor must consider whether the financial statements need to be revised.
Summary of Treatment
| Type of event | Adjust the accounts? | Disclose in notes? |
|---|---|---|
| Adjusting event | Yes | Yes, if material |
| Non-adjusting event | No | Yes, if material |
| Going concern doubt arising post year end | Yes (change basis of preparation) | Yes |
| Dividend declared after year end | No | Yes |