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

Mehta Textiles Ltd. has a reporting date of 31 March 2026 and its Board approved the financial statements on 20 May 2026. On 12 May 2026, a fire destroyed a major production plant that was in full working order on 31 March 2026. How should the company treat this event in its financial statements for the year ended 31 March 2026?

The fire is a non-adjusting event because it reflects a condition arising after the reporting period, as the plant was intact on 31 March 2026. The company should not adjust recognised amounts, but should disclose the nature of the event and an estimate of its financial effect.

  1. AAdjust the carrying amount of the plant to zero as an adjusting event
  2. BDo not adjust the amounts recognised; disclose the nature of the event and an estimate of its financial effectCorrect
  3. CRecognise a provision for the loss because the fire occurred before approval
  4. DIgnore the event completely because it occurred after the reporting date

Explanation

The destruction of a major production plant by fire after the reporting period is listed as an example of a non-adjusting event. The plant existed in good condition at the reporting date, so the fire indicates a condition that arose afterwards. Amounts are not adjusted, but disclosure is required. Adjusting for it would be wrong because the condition did not exist at 31 March 2026.

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