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

Ganga Steels Ltd has a reporting date of 31 March 2026, with the Board approving the financial statements on 30 June 2026. The company had a long-term loan whose covenant was breached on 28 March 2026, making the loan payable on demand at the reporting date. On 15 June 2026 the lender agreed in writing not to demand repayment because of the breach. Assume the period begins before 1 April 2026, so the closing paragraph of the definition of events after the reporting period applies. Which treatment is correct?

The lender's agreement is an adjusting event. Where a material long-term loan provision is breached on or before the reporting date, making the loan payable on demand, an agreement by the lender before the financial statements are approved not to demand payment is treated as adjusting.

  1. ATreat the lender's agreement as a non-adjusting event, so the loan remains current at 31 March 2026
  2. BTreat the lender's agreement as an adjusting event, because it was obtained before approval of the financial statementsCorrect
  3. CIgnore the agreement, as it was obtained after the reporting date
  4. DTreat it as adjusting only if the agreement was obtained before 31 March 2026

Explanation

Under the closing paragraph of the definition, where a material provision of a long-term loan is breached on or before the reporting date so that the liability is payable on demand, the lender's agreement before approval of the statements not to demand payment is an adjusting event. Here the breach was on 28 March and the agreement came on 15 June, before the 30 June approval. Hence it is adjusting, not non-adjusting.

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