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

Kapoor Steels Ltd. has a reporting date of 31 March 2026, and the Board approved the statements on 28 May 2026. Consider these events: (i) on 12 April 2026 the Government enacted a change in tax rate that significantly affects deferred tax balances; (ii) on 20 April 2026 the company announced a plan to discontinue an operation; (iii) on 8 May 2026 the company discovered a fraud committed in February 2026 that misstated inventory; (iv) on 15 May 2026 abnormally large changes occurred in foreign exchange rates. Which events are adjusting?

Only event (iii), the discovery of fraud that misstated inventory, is adjusting because it shows the financial statements were incorrect. The tax rate change, the discontinuation plan and the abnormal exchange rate movement are non-adjusting events that are disclosed, not adjusted.

  1. A(i) and (iv) only
  2. B(ii) and (iii) only
  3. C(iii) onlyCorrect
  4. D(i), (ii) and (iii) only

Explanation

The discovery of fraud or errors showing that the financial statements are incorrect is an adjusting event. Tax rate changes enacted after the period, the announcement of a plan to discontinue an operation, and abnormally large changes in exchange rates are all listed non-adjusting events requiring disclosure. Hence only (iii) is adjusting.

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