Events After the Reporting Period: A Year-End Review Finance Teams Can Evidence
Build a documented post-balance-sheet events review that distinguishes year-end evidence from new events before accounts are authorised.
Closing the ledger does not close the evidence file. Between the reporting date and the date the accounts are authorised for issue, a customer may fail, a dispute may settle or a major incident may occur. Finance needs a controlled process for identifying those developments and deciding what they mean for the financial statements. Waiting for the auditor to ask is not a process.
Define the review window and ownership
For an FRS 102 reporter, Section 32 addresses events after the end of the reporting period. Set out the reporting date, the expected authorisation timetable and the person responsible for maintaining the review. Refresh it up to authorisation rather than treating it as a one-off close task. In a group, ask each entity to report relevant developments through a consistent channel.
Distinguish evidence from a new condition
An adjusting event provides evidence about conditions that existed at the end of the reporting period. A non-adjusting event relates to conditions that arose afterwards. The date an invoice, notice or decision arrives does not settle the classification. Management must understand the underlying facts. Material non-adjusting events may require disclosure even when the year-end figures are not changed.
Make the information sweep specific
Review board minutes, management accounts, significant cash receipts and payments, legal correspondence, lender communications and operational incident reports. Ask sales about customer disputes and ask operations about business interruption or asset damage. A standard email asking whether anything important happened is weaker than targeted questions tied to the business’s actual risks.
Use examples carefully
A customer failure after year-end may provide evidence about recoverability at year-end, but the circumstances need to be assessed. A later settlement of litigation may clarify an obligation that existed at the reporting date. By contrast, damage caused by an incident arising only after year-end may be a non-adjusting event. These examples prompt investigation; they are not automatic classifications for every case.
Maintain a decision log
For each event, record the discovery date, underlying condition, supporting documents, financial effect and proposed treatment. Include a materiality assessment and a named reviewer. Where information is incomplete, document the next action and deadline. Reconcile any resulting adjustment to the final trial balance and any disclosure to the final accounts. This prevents an issue being discussed in a meeting but disappearing before sign-off.
Escalate conclusions that affect the whole accounts
Some developments require more than an adjustment or note. Where events call the going concern basis into question, management must assess the applicable requirements and seek appropriate advice. Do not treat a significant financing or trading development as ordinary disclosure housekeeping. Notify the board and the auditor promptly so that the relevant conclusions can be reviewed before authorisation.
Finish with a final refresh
Before the accounts are authorised, confirm that entity responses, legal updates and board information are current. Retain the final review date and sign-off. A concise, evidenced log gives management a stronger basis for its conclusion than a lengthy checklist with no underlying documents. This guidance is general information; the entity’s reporting framework and facts determine the treatment.
Source: https://www.frc.org.uk/library/standards-codes-policy/accounting-and-reporting/uk-accounting-standards/frs-102/