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

Kaveri Pharma Ltd. closed its books on 31 March 2026, and the Board approved the financial statements on 25 June 2026. Trade receivables included Rs 40 lakh due from Sahyadri Distributors. On 10 May 2026, Sahyadri Distributors was declared bankrupt, and the company expects to recover nothing. No impairment allowance had been made at 31 March 2026 for this balance. What is the appropriate treatment?

It is an adjusting event. A customer bankruptcy after the reporting period usually confirms the receivable was credit-impaired at the reporting date. The company should therefore recognise a Rs 40 lakh loss allowance in the financial statements for the year ended 31 March 2026, not in the following year.

  1. ANon-adjusting event; disclose only, with no change to receivables
  2. BAdjusting event; recognise a loss allowance of Rs 40 lakh in the year ended 31 March 2026Correct
  3. CAdjusting event; recognise the loss of Rs 40 lakh in the next financial year
  4. DNon-adjusting event; recognise the loss when the amount is written off in cash terms

Explanation

The bankruptcy of a customer after the reporting period usually confirms that the customer was credit-impaired at the reporting date. This is an adjusting event, so the Rs 40 lakh loss allowance is recognised in the year ended 31 March 2026. Deferring it to the next year would misstate both years.

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