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CA Intermediate · Advanced Accounting · AS 4 Contingencies and Events occurring after the Balance Sheet Date

Anand Engineering Ltd. closes its books on 31 March 2026. The financial statements were approved by the board on 10 June 2026. Which one of the following events occurring between the balance sheet date and the approval date requires the company to change the amounts recognised in the FY 2025-26 financial statements?

The insurance claim settlement received on 2 May 2026 requires adjustment, because the damage occurred in February 2026 and the settlement confirms the amount of the claim at the balance sheet date. The other events arose after year end and are non-adjusting, needing only disclosure if material.

  1. AAnnouncement on 5 May 2026 of a plan to restructure a division, with no implementation started
  2. BReceipt on 2 May 2026 of a settlement of an insurance claim for damage that occurred in February 2026, where the claim had been accounted for at a lower amountCorrect
  3. CIssue of equity shares to the public on 20 April 2026
  4. DA major fall in the market value of investments on 15 May 2026 due to market movements after year end

Explanation

The insurance settlement relates to damage that occurred before the balance sheet date, so it gives evidence of the amount of the claim at that date and is an adjusting event. A restructuring plan announced later, a share issue and a post-year-end fall in market value are non-adjusting events, which only need disclosure if material.

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