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CMA Intermediate · Corporate Accounting and Auditing · Events after the Reporting Period (Ind AS 10)

A company breached a material provision of a long-term loan agreement before the end of its reporting period, so the loan became payable on demand at the reporting date. The lender agreed before approval of the financial statements not to demand payment. Under the text of Ind AS 10 as given, which statement is correct?

The lender's agreement not to demand payment, given before the financial statements are approved, is considered an adjusting event under the proviso in the definition, even though it occurs after the reporting period. This applies to periods before the omission effective for periods beginning on or after 1 April 2026.

  1. AThe lender's agreement is a non-adjusting event because it occurred after the reporting period
  2. BThe lender's agreement is to be considered an adjusting event, notwithstanding the general definitionCorrect
  3. CThe lender's agreement is ignored, and the loan is always shown as non-current
  4. DThe lender's agreement is an adjusting event only if it is given after the Board approval

Explanation

The definition provides that, despite the general rule, where a breach makes the liability payable on demand at the reporting date, the lender's agreement before approval for issue not to demand payment is considered an adjusting event. Option A applies the general rule that the proviso overrides. The text also carries a footnote that this closing paragraph is omitted for annual periods beginning on or after 1 April 2026, so it is relevant to earlier periods.

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