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

Meru Pharma Ltd. has a reporting date of 31 March 2026 and the Board approved the accounts on 30 May 2026. At 31 March 2026 it held inventory of a drug batch at cost Rs 40 lakh, 10,000 units at Rs 400 per unit. In April 2026, all the units were sold for Rs 350 per unit, net of selling costs, owing to a quality issue that existed in the batch before year-end. What is the adjustment required in the year ended 31 March 2026?

Meru should write down inventory by Rs 5 lakh. The post-year-end sale gives evidence of net realisable value at the reporting date, because the quality problem already existed. NRV is 10,000 units at Rs 350, or Rs 35 lakh, against cost of Rs 40 lakh, so the write-down is Rs 5 lakh.

  1. ANo adjustment; disclose only
  2. BWrite down inventory by Rs 5 lakhCorrect
  3. CWrite down inventory by Rs 40 lakh
  4. DWrite down inventory by Rs 3.5 lakh

Explanation

The sale of inventories after the reporting period may give evidence about net realisable value at the reporting date, and the quality issue existed at year-end. NRV is 10,000 x Rs 350 = Rs 35 lakh against cost of Rs 40 lakh. The write-down is therefore Rs 5 lakh. Making no adjustment treats the price fall as a later condition, which is wrong here.

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