Skip to content

CA Final · Financial Reporting · Ind AS 10 Events after the Reporting Period

Arohan Engineering Ltd. has a reporting date of 31 March 2026, and the Board approved the statements on 28 May 2026. It had recognised a provision of Rs 12 lakh for a damages claim by a former supplier. On 12 April 2026, the court settled the case and ordered Arohan to pay Rs 20 lakh, confirming the obligation existed on 31 March 2026. Separately, on 20 April 2026 Arohan began litigation against a competitor for infringement that occurred wholly on 15 April 2026. Which treatment is correct?

The provision should be increased by Rs 8 lakh to Rs 20 lakh because the court settlement confirms a present obligation at the reporting date. The new litigation arises solely from an April 2026 event, so it is non-adjusting and is only disclosed if material.

  1. AIncrease the provision to Rs 20 lakh, and disclose the new litigation as a non-adjusting event if materialCorrect
  2. BKeep the provision at Rs 12 lakh and disclose Rs 8 lakh as a contingent liability
  3. CIncrease the provision to Rs 20 lakh and also adjust for the new litigation
  4. DLeave the provision unchanged and treat both matters as non-adjusting

Explanation

Settlement after the reporting period confirming a present obligation at year end is an adjusting event, so the provision rises by Rs 8 lakh (20 - 12) to Rs 20 lakh. Disclosing a contingent liability is not appropriate because the settlement gives additional evidence. Major litigation arising solely from events after the reporting period is non-adjusting, so nothing is adjusted for it, and it is disclosed if material.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 10 Events after the Reporting Period shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 10 Events after the Reporting PeriodFree diagnostic mock

More Ind AS 10 Events after the Reporting Period questions