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

Bharat Steels Ltd. has a reporting date of 31 March. On 20 April, before the Board approved the financial statements, a fire destroyed a major production plant. Under Ind AS 10, how should this event be treated in the financial statements for the year ended 31 March?

The fire is a non-adjusting event, as it arose after the reporting period. The amounts are not adjusted, but the nature of the event and an estimate of its financial effect, or a statement that no estimate can be made, must be disclosed.

  1. AAdjust the carrying amount of the plant to nil in the year ended 31 March
  2. BMake no adjustment and disclose the nature of the event and an estimate of its financial effect, or a statement that an estimate cannot be madeCorrect
  3. CMake no adjustment and no disclosure because the plant existed intact on 31 March
  4. DCreate a provision for the loss in the year ended 31 March and disclose nothing further

Explanation

The fire occurred after the reporting period and reflects conditions arising after it, so it is a non-adjusting event. Amounts are not adjusted. Because the destruction of a major plant is material, the nature of the event and an estimate of its financial effect (or a statement that it cannot be estimated) must be disclosed. Adjusting the plant to nil is wrong because the plant was intact at the reporting date.

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