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

Kaveri Industries Ltd. had a year ended 31 March 2027, and its accounts were approved on 25 June 2027. At year-end it had recognised a provision of Rs 8,00,000 for a damages claim filed by a customer. On 10 May 2027, the court settled the case, directing the company to pay Rs 11,50,000. The settlement confirms that the obligation existed at 31 March 2027. What amount of additional charge should be made in the year ended 31 March 2027?

An additional charge of Rs 3,50,000 is required in the year ended 31 March 2027. The settlement confirms a present obligation at the reporting date, so the existing provision of Rs 8,00,000 is raised to Rs 11,50,000 as an adjusting event.

  1. ANil, because the settlement date falls in the next year
  2. BRs 11,50,000
  3. CRs 3,50,000Correct
  4. DRs 8,00,000

Explanation

Settlement of a court case after the reporting period that confirms a present obligation at year-end is an adjusting event. The existing provision of Rs 8,00,000 is adjusted to Rs 11,50,000, so the additional charge is 11,50,000 - 8,00,000 = Rs 3,50,000. Charging the full Rs 11,50,000 would double count the provision already made.

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