Introduction
In this guide the Corporate Reporting Faculty summarises the requirements under FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland 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.
While this guide is primarily aimed at those entities preparing accounts in accordance with FRS 102, consideration is also given to entities reporting under FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime. It does not cover disclosures required in the strategic report and directors’ report.
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 (FRS 102.4.1).
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 ie, when the accounts are approved by the board of directors and signed on behalf of the board by a director of the company (FRS 102.32.2).
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 (FRS 102.32.2 & 4).
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 (FRS 102.32.2 & 10).
Adjusting or non-adjusting
Significant judgement may be needed to determine the conditions that existed at the balance sheet date (FRS 102.32.2) 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 (FRS 102.8.6).
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 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 FRS 102.3.8 and FRS 102.32.7A, 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.
FRS 102 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 (FRS 102.32.7B).
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 (FRS 102.3.9).
If management determines that the going concern assumption is no longer appropriate, FRS 102 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 (FRS 102.3.9). FRS 102 does not specify the basis on which the accounts should be prepared, when not prepared on the going concern basis.
Small entities and Section 1A of FRS 102
With the exception of the disclosures relating to going concern (see below) the recognition, measurement and disclosure requirements set out in this guide also apply to entities applying FRS 102 Section 1A Small Entities.
Although entities applying Section 1A are not currently required to provide the disclosures relating to going concern outlined in this guide, they are nevertheless encouraged, when relevant, to provide this information (January 2022 edition of FRS 102.1AE.1). Furthermore, small entity accounts must give a true and fair view. Therefore, judgement must be applied when considering whether further disclosures, over and above those specifically required by Section 1A of FRS 102, will be needed.
It is important to note that the Periodic Review 2024 amendments will introduce additional mandatory disclosures for small entities in the UK, including disclosures relating to going concern. These changes are effective for accounting periods beginning on or after 1 January 2026, with earlier application permitted. For more information about the amendments ICAEW members and Corporate Reporting Faculty subscribers can access the faculty’s factsheet:
Micro-entities and FRS 105
The principles for the recognition and measurement requirements relating to post balance sheet events, as outlined in this guide, are the same for an entity applying FRS 105. However, an entity applying FRS 105 is not required to make any of the disclosures outlined in this guide. Indeed, very limited disclosures are required in micro-entity accounts, and provided these and other basic legal requirements are complied with, the accounts are presumed by law to give a true and fair view.
That is not to say that a micro-entity cannot choose to disclose additional information, including for example, in relation to post balance sheet events. However, if it does choose to include additional information, over and above that required by FRS 105, it must refer to the relevant requirements of Section 1A Small Entities of FRS 102 regarding that information.
Further ICAEW resources
- Planning for the 2024/25 reporting season
- Going concern considerations – a guide for FRS 102 preparers
- Judgements and estimates
- How high inflation impacts accounting
- Small and micro-entity reporting hub
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 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:
ICAEW Know-How from the Corporate Reporting Faculty
This guidance is created by the Corporate Reporting Faculty – recognised internationally as a leading authority on financial reporting. The Faculty formulates ICAEW policy on financial reporting issues and makes submissions to standard setters and other external bodies. Join the Faculty to access exclusive technical resources and practical know-how.
Download this helpsheet
This guide outlines the factors to consider when determining whether post balance sheet events are adjusting or non-adjusting in the accounts.
Download now