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

Meru Ltd's financial year ended 31 March 2027. A fire destroyed a major production plant on 12 April 2027, and the Board approved the accounts on 28 June 2027. On 10 June 2027 the Board also proposed a dividend, and management later concluded that the company can continue operations using other plants. Which combination of treatments is correct under Ind AS 10?

Disclose the fire as a non-adjusting event, do not recognise the post-period dividend as a liability, and keep the going concern basis. The fire arose after year-end, no dividend obligation existed at the reporting date, and management did not decide to cease trading.

  1. AWrite off the plant at 31 March 2027, recognise the dividend as a liability, and abandon going concern
  2. BDisclose the fire as a non-adjusting event, do not recognise the dividend as a liability, and retain the going concern basisCorrect
  3. CDisclose the fire only if insurance is not available, recognise the dividend, and retain going concern
  4. DAdjust for the fire loss, do not recognise the dividend, and disclose going concern uncertainty

Explanation

Destruction of a major production plant by fire after the reporting period is a non-adjusting event that results in disclosure, since the plant existed undamaged at year-end. The dividend proposed after year-end creates no liability at the reporting date. As management has no intention to cease trading, the going concern basis continues. The other options adjust or recognise items the standard does not permit.

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