Events After the Reporting Period: Which to Reflect in Annual Financial Statements

What counts as an event after the reporting period

The topic is covered in most detail by IAS 10 Events after the Reporting Period. These are favourable and unfavourable events that occur between the end of the reporting period and the date when the financial statements are authorised for issue.

The reporting period for annual financial statements is the calendar year from 1 January to 31 December, and the reporting date is the last calendar day of the period (Regulation on the deadlines for financial statements, registration No. 3567). So the window for subsequent events opens on 1 January and closes on the day the financial statements are approved.

The company sets the approval date itself: usually it is the day the statements are signed by the director and chief accountant, or a decision of the governing body. It is worth stating it in the notes so that users understand up to which point events have been taken into account. The IAS 10 logic is also useful when preparing statements under NAS: the accrual principle requires transactions and events to be recognised in the period to which they relate, not by the date documents arrive.

Two types of events

• Adjusting events provide evidence of conditions that existed at the end of the reporting period. The amounts in the financial statements are adjusted to reflect them.
• Non-adjusting events indicate conditions that arose after the reporting period. The amounts are not changed, but if the event is material it is disclosed in the notes.
• The key classification question: did the cause exist on 31 December? If yes, adjust; if the cause arose later, disclose.

Examples of adjusting events

• A court ruling in January on a dispute that began last year: it confirms that the obligation existed at the reporting date, so the provision is updated to the amount in the ruling.
• Bankruptcy of a customer whose debt was outstanding on 31 December: this usually confirms that the receivable was already impaired at year end.
• Sale of inventory early in the year below cost — evidence that its net realisable value at the reporting date was below its carrying amount.
• Discovery of an error or fraud that distorted last year's financial statements.
• Finalisation of the cost of an asset bought before year end, or of an annual bonus where the obligation arose last year.

Examples of non-adjusting events

• A fire, accident or natural disaster in the warehouse in February.
• A fall in the market price of investments after 31 December, if it reflects new circumstances.
• A major transaction, acquisition, reorganisation or decision to close a division made after the reporting date.
• Dividends declared after the reporting date: there was no obligation for them on 31 December.
• Significant new loans, guarantees and lawsuits relating to events of the new year.
• If a non-adjusting event is material, the notes disclose its nature and an estimate of its financial effect, or state that such an estimate cannot be made.

A special case: going concern

Sometimes an event after the reporting date calls into question the company's very ability to continue: loss of a key customer, revocation of a licence, the owners' decision to liquidate. NAS No. 1 requires management to assess the ability to continue operating when preparing the statements; they are prepared on a going concern basis unless management intends to liquidate or cease trading, or has no realistic alternative but to do so.

If management is aware of material events or conditions affecting the going concern assumption, this is disclosed in the notes to the financial statements. From 2027, National Financial Reporting Standard No. 2 comes into force, which states explicitly that the going concern assessment takes into account information covering at least twelve months after the end of the reporting period.

Deadlines: where the line is drawn

Annual financial statements under NAS are submitted no later than 1 March of the year following the reporting year, and under IFRS no later than 1 May (item 7 of Regulation No. 3567). The annual profit tax return is due no later than 1 March (Article 339 of the Tax Code). The earlier a company closes its year, the shorter the subsequent events window — but the more carefully January documents must be tracked.

If an adjusting event becomes known after the tax return has been filed and has led to an understatement of tax, the taxpayer must make corrections and file an amended tax return (Article 83 of the Tax Code). If tax was not understated, amending is a right rather than an obligation.

A practical year-end routine

• set out in the accounting policy who approves the annual statements and when — this date closes the events window;
• in January and February collect court rulings, counterparty letters, damage reports and bankruptcy notices;
• for each event ask whether the cause existed on 31 December;
• reflect adjusting events in last year's statements and material non-adjusting events in the notes;
• check the effect of adjustments on profit tax and file an amended return if needed.
• The auditor tests these procedures separately, so it is better to document the list of events reviewed in writing.