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

Kaveri Pharma Ltd reports at 31 March 2026 a trade receivable of Rs 40 lakh from Sunrise Distributors, against which no loss allowance was made. On 25 April 2026, before the Board approved the financial statements, Sunrise Distributors was declared insolvent. Which treatment is correct under Ind AS 10?

It is an adjusting event. The post-period insolvency of a customer usually confirms that the receivable was credit-impaired at the reporting date, so Kaveri Pharma recognises the impairment in the financial statements for the year ended 31 March 2026 rather than merely disclosing it.

  1. ADisclose only, since the insolvency occurred after the reporting period
  2. BTreat it as an adjusting event and recognise the credit impairment in the year ended 31 March 2026Correct
  3. CRecognise the loss in FY 2026-27 as a change in estimate
  4. DTreat it as a non-adjusting event and show a contingent liability of Rs 40 lakh

Explanation

The bankruptcy of a customer after the reporting period usually confirms that the customer was credit-impaired at the reporting date. That makes it an adjusting event, so the impairment is recognised in the 2026 financial statements. Option A fails because the insolvency is evidence of a condition that existed at the reporting date.

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