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

Kaveri Engineering Ltd. closed its books on 31 March 2027, and the Board approved the accounts on 25 May 2027. Inventory costing ₹6,00,000 was held at 31 March 2027. In April 2027 it was sold for ₹4,50,000 net of selling costs, and no other change in conditions happened after year end. What adjustment is needed for the year ended 31 March 2027?

Inventory should be written down by ₹1,50,000. Under Ind AS 10, a post-year-end sale can give evidence of net realisable value at the reporting date, so cost of ₹6,00,000 is reduced to the ₹4,50,000 net amount realised, making it an adjusting event.

  1. ANo adjustment, because the sale took place after the reporting period
  2. BWrite down inventory by ₹1,50,000, as the sale gives evidence of net realisable value at the reporting dateCorrect
  3. CWrite down inventory by ₹6,00,000, the full cost
  4. DDisclose ₹1,50,000 as a non-adjusting event only

Explanation

Ind AS 10 states that the sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period. Cost is ₹6,00,000 and NRV evidenced is ₹4,50,000, so the write-down is ₹1,50,000. Not adjusting would leave inventory above NRV.

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