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

Lakshya Engineering Ltd. has a year end of 31 March 2026, and the Board approved the accounts on 30 June 2026. At 31 March 2026 inventory of Rs 25 lakh (cost) was held. In May 2026 the entire lot was sold for Rs 21 lakh net of selling costs, due to a quality defect that existed at the year end. No write-down was made earlier. What is the adjustment required?

The company should write down inventory by Rs 4 lakh in the 2025-26 statements. The post-year-end sale provides evidence of net realisable value of Rs 21 lakh at the reporting date, which is below the cost of Rs 25 lakh, so it is an adjusting event.

  1. ANo adjustment, only disclosure of Rs 4 lakh
  2. BWrite down inventory by Rs 4 lakh in the 2025-26 financial statementsCorrect
  3. CWrite down inventory by Rs 21 lakh
  4. DRecognise a Rs 4 lakh loss in 2026-27

Explanation

Sale of inventories after the reporting period may give evidence about net realisable value at year end. NRV is Rs 21 lakh against cost of Rs 25 lakh, so the write-down is Rs 25 lakh - Rs 21 lakh = Rs 4 lakh in 2025-26. Recognising the loss in 2026-27 ignores that it is an adjusting event.

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