# IAS 10 Adjusting and Non-Adjusting Events: SAR Examples

> Understand IAS 10 adjusting and non-adjusting events with Saudi-riyal examples, journal entries, disclosure decisions, and a practical year-end review method.

- Canonical page: https://accountery.app/learn/ias-10-adjusting-non-adjusting-events
- Language: English (en)
- Category: financial-statements
- Estimated reading time: 12 minutes
- Published: 2026-09-10
- Updated: 2026-09-10

## IAS 10 adjusting and non-adjusting events: which dates matter?

IAS 10 adjusting and non-adjusting events become easier when you separate two questions: when did the underlying condition exist, and when did you obtain evidence about it? A January document can change December financial statements. Another January event can leave December amounts unchanged while still needing a clear note. The document date alone cannot settle the accounting.

The review window runs from the reporting date to **authorisation for issue**. That boundary and the distinction between existing and new conditions are explained in the [IFRS Foundation’s IAS 10 overview](https://www.ifrs.org/issued-standards/list-of-standards/ias-10-events-after-the-reporting-period/). Start with those dates before reading a scenario’s amounts.

For example, assume a fictional business reports at 31 December 2025. Its draft is ready on 10 February 2026, and its board authorises the financial statements for issue on 5 March. Shareholders receive them on 20 March. For these stated facts, use 5 March as the endpoint; finishing the spreadsheet on 10 February did not finish the review.

In an actual engagement, identify who has the relevant authority from the entity’s governance arrangements. Do not automatically substitute the filing deadline, cash-payment date, or a later shareholder meeting. Record the evidence supporting the authorisation date so another accountant can reproduce your timeline.

This guide uses invented Saudi businesses and amounts in Saudi riyals. The two worked cases focus on financial-reporting decisions, with no tax effects included in the calculations. Keep three spaces on your working paper: **condition, evidence, consequence**. By the end, you should be able to fill all three without relying on a memorised list of event names.

## IAS 10 adjusting and non-adjusting events: how do you decide?

Ask what the new information tells you about the business at the reporting date. If it sheds light on a condition already present, consider the year-end measurement under the relevant accounting standard. If it describes a condition that started later, keep that later event out of the earlier period’s amounts and assess disclosure. Always check going concern separately.

Use this compact decision table as a reading aid. It organises your reasoning; it does not replace the evidence in the question.

| Question | What to identify | Working-paper output |
|---|---|---|
| Is the information within the review window? | Reporting and authorisation dates | A dated timeline |
| What condition does it describe? | Evidence of when that condition existed | An adjusting or non-adjusting conclusion |
| What accounting follows? | Measurement, disclosure, and going concern | An entry, a note, or a basis-of-preparation assessment |

A legal claim illustrates why two standards may work together. IAS 10 determines whether later evidence affects the year-end reporting. IAS 37 addresses the recognition and measurement of a [provision](/glossary#provision). The [IFRS Foundation’s IAS 37 overview](https://www.ifrs.org/issued-standards/list-of-standards/ias-37-provisions-contingent-liabilities-and-contingent-assets/) explains the present-obligation and probable-outflow requirements. Our [provisions and contingent liabilities guide](/learn/provisions-contingent-liabilities-ias-37) develops that separate recognition decision.

Do not begin by asking whether the amount is large. Size can affect materiality, but it cannot make a newly arising condition exist at an earlier date. Likewise, a favourable outcome deserves assessment just as an unfavourable one does.

A useful self-check is to cover the January date and explain the December condition aloud. If all you can say is that something happened later, you have identified chronology but have not yet justified the treatment.

## Worked example 1: a Riyadh lawsuit changes the year-end estimate

Riyadh fictional business Najd Packaging failed to meet a customer’s delivery obligations in November 2025. At 31 December, a present obligation existed, an outflow was probable, and the company had recognised SAR 110,000 based on its best estimate. On 27 January 2026, a settlement fixed compensation at SAR 170,000. It related entirely to the November failure and was agreed before authorisation on 5 March.

The settlement supplies evidence about the obligation at year-end. It is not compensation for a new January breach. IAS 10 paragraph 9(a) specifically addresses settlements that confirm an existing obligation; see the [official IAS 10 text, paragraphs 8–9](https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/part-a/ias-10-events-after-the-reporting-period.pdf).

The additional amount is **SAR 170,000 − SAR 110,000 = SAR 60,000**. Because SAR 110,000 is already recorded, the year-end [adjusting entry](/glossary#adjusting-entry) captures only the difference:

| Account | Debit, SAR | Credit, SAR |
|---|---|---|
| Litigation expense | 60,000 | — |
| Litigation provision | — | 60,000 |

The closing liability becomes SAR 170,000. If profit before this adjustment was SAR 900,000, revised profit is SAR 840,000 before any tax effects. Recording SAR 170,000 again would overstate both the total expense and the liability by SAR 110,000.

Assume the company pays SAR 170,000 on 20 February. In the following period, debit the liability and credit bank for SAR 170,000; do not charge the settled amount to expense again. Keep the year-end adjustment and the later cash settlement as separate steps in the file.

Your conclusion should identify the November breach, the January evidence, the amount already booked, and the additional SAR 60,000. Attach the legal assessment and settlement support. That explanation matters more than writing “adjusting event” beside a balanced entry: it shows why these financial statements, and this amount, must change.

## Worked example 2: a Jeddah inventory fire starts a new condition

Jeddah fictional business Red Sea Homewares held inventory of SAR 1,800,000 at 31 December 2025. Count records and condition checks support that carrying amount. On 12 January 2026, a new fire destroyed one warehouse’s stock with a carrying amount of SAR 420,000. Assume no salvage value or insurance recovery, no related damage at year-end, and continued operations from other premises. Authorisation is on 5 March.

The loss arose in January. The December [statement of financial position](/glossary#balance-sheet) therefore retains SAR 1,800,000 for inventory, assuming no other adjustments. Do not reduce it to SAR 1,380,000 merely because the accountant knows about the fire before the statements are issued.

For the following period, the inventory-loss calculation is **SAR 1,800,000 − SAR 420,000 = SAR 1,380,000**, assuming no purchases, sales, or other movements for illustration. The January entry is:

| Account | Debit, SAR | Credit, SAR |
|---|---|---|
| Inventory fire loss | 420,000 | — |
| Inventory | — | 420,000 |

[IAS 2’s official overview](https://www.ifrs.org/issued-standards/list-of-standards/ias-2-inventories/) explains that inventory losses are expensed in the period they occur. Here, that is January 2026. Keeping the loss out of December does not remove it from the accounting records altogether.

Assume management concludes the event is material. A draft note would identify the 12 January fire, the destroyed stock’s SAR 420,000 carrying amount, the absence of recoveries in this example, and the known operational effects. Any wider financial effects should be estimated where possible, with inability to estimate stated where relevant. SAR 420,000 is the inventory loss, not automatically the entire cost of disruption.

Then challenge the assumptions. Evidence that stock was already damaged at 31 December would change the analysis. Evidence that the fire leaves the whole entity unable to continue would require the separate going-concern assessment below. The treatment follows the facts you can support.

## Why do dividends and going concern need separate attention?

Dividends are a useful check on whether you are matching obligations to the right date. Suppose a business declares SAR 240,000 to ordinary shareholders on 15 February 2026, before authorisation of its 2025 statements. Assume there was no obligation at 31 December. Calling it a distribution “from 2025 profits” does not create a December liability. Address the dividend in the notes rather than adding a year-end payable.

IAS 10 paragraphs 12–13 give the dividend rule. The [Arabic IAS 10 published by SOCPA](https://socpa.org.sa/getattachment/Socpa/Professional-standards/Accounting-standards/Endorsed/23-IAS-10-2025.pdf.aspx?lang=ar-SA) is useful for checking both the rule and its Arabic terminology. This is an accounting illustration, not a guide to the company-law approvals for declaring dividends.

**Going concern is a separate question about the basis of preparation.** If, before authorisation, management intends to liquidate or cease trading, or has no realistic alternative, the financial statements cannot stay on a going-concern basis. This is more consequential than choosing a debit and credit for one later event. The [IFRS Interpretations Committee’s June 2021 decision](https://www.ifrs.org/news-and-events/updates/ifric/2021/ifric-update-june-2021/) confirms the principle for statements not yet authorised.

Return to Red Sea Homewares. Our original facts say it can continue from other premises. Now change the facts: its only remaining funding is withdrawn and there is no realistic alternative to ceasing trade. You cannot reuse the original conclusion without addressing the basis of preparation.

In a study answer, state which fact changed and which conclusion it affects. In a real close, gather the financing evidence, operating plans, and management assessment. A strong file keeps the event classification and the going-concern conclusion visible separately instead of burying both in one label.

## How do you write an evidence trail and a useful disclosure?

Prepare a short event log as part of your [month-end and year-end close routine](/learn/month-end-close-checklist). Give every event an owner and a clear status. A practical record contains the event date, discovery date, reporting date, authorisation date, supporting document, affected balance, conclusion, and reviewer. These are suggested working-paper fields, not a prescribed form.

For Najd Packaging, the reviewer should be able to trace the SAR 60,000 adjustment from the settlement document to the journal and final liability. For Red Sea Homewares, the trail should explain why there is no December inventory-loss entry and where the January entry and year-end note can be found. **A documented decision to make no entry is still a decision.**

For each material category of non-adjusting event, IAS 10 paragraph 21 requires the event’s nature and an estimated financial effect, or a statement that the effect cannot be estimated. Paragraphs 17 and 19 also address authorisation information and updated disclosures about existing conditions. Keep those disclosure checks distinct from the numerical adjustment checklist.

Try drafting the fire note in three short parts: what happened and when; the measurable loss; and the remaining effects or uncertainty. Avoid a generic sentence saying “subsequent events were reviewed” when there is a specific material event to explain. A reader should understand the economic consequence without needing access to your working papers.

Finally, reconcile the conclusion across the financial statements, the note, and the event log. Check that an updated liability in one place is not still described elsewhere using an obsolete estimate. The [guide to adjusting entries](/learn/adjusting-entries-guide) can help you refresh the posting mechanics once the reporting-period decision is settled.

## What common mistakes weaken an IAS 10 answer?

Most weak answers skip a reasoning step before reaching a familiar label. Review your work for the following mistakes, then identify exactly what you would change. Merely highlighting an incorrect answer will not stop you repeating the same approach next week.

- **Using discovery as the condition date.** Ask what the new evidence says about the reporting date. The November breach and January settlement are different facts with different roles.
- **Replacing reasoning with a memorised event name.** A fire is not a universal shortcut. Read whether damage already existed and whether continued operations remain realistic.
- **Booking the full revised amount twice.** Reconcile the required closing balance to the amount already recognised. Najd Packaging needs another SAR 60,000, not another SAR 170,000.
- **Treating disclosure as a substitute for an entry.** A narrative explanation does not correct an understated year-end liability when adjustment is required.
- **Ignoring the later period.** Red Sea Homewares still records its January loss even though December inventory is unchanged.
- **Stopping at the draft date.** Keep the event review current through the supported authorisation date and document the final review.
- **Assuming every estimate is known.** Separate a measurable asset loss from uncertain disruption costs; do not invent a single precise total.

Also check the language of your conclusion. “No accounting impact” is misleading if what you mean is “no adjustment to December amounts, with disclosure and later-period accounting still required.” Precision here helps both an examiner and a colleague reviewing your file.

For each mistake, write one prevention step beside it. A repeated arithmetic error needs a balance reconciliation. A repeated timing error needs a timeline. A disclosure omission needs a note checklist. Match the corrective exercise to the weakness instead of rereading the whole standard after every wrong answer.

## How can you practise the decision with Accountery?

Turn the two cases into a short practice session before reading more examples. Use a blank page with columns for the condition, evidence, affected reporting period, calculation, entry, and disclosure. Work without looking at the solution, then compare both the reasoning and the amounts. A correct total with the wrong period is an unfinished answer.

First, repeat Najd Packaging with an existing liability of SAR 125,000 and the same SAR 170,000 settlement. Your additional expense should be SAR 45,000. Explain why changing the amount already booked changes the entry without changing the event classification. Then repeat the original case and check that February’s payment does not create a second expense.

Next, rewrite the fire case with the fire occurring on 29 December and the report arriving on 12 January. The December financial statements now need to reflect the loss. This variation tests whether you understood the date of the condition instead of memorising “fire equals non-adjusting.” Keep all other assumptions unchanged so you can isolate the effect of that one fact.

Use Accountery’s accounting practice to strengthen the entries and statement effects that follow these decisions. Bring the same timeline method to each relevant scenario you attempt. If you are choosing a professional study path, the [certification comparison and prep starting point](/prep/which-certification) can help you connect your next practice session to a suitable goal.

Finish by writing a three-sentence review note: your classification, the decisive evidence, and the required accounting or disclosure. Reattempt a changed version in a few days. Progress means explaining why a changed fact alters the answer and showing where the resulting amount belongs—not simply recognising the original numbers.

Official sources were checked on 10 September 2026. The cases and practice variations are original teaching examples.

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