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

Orion Steels Ltd has a reporting date of 31 March 2026. Its Board approved the financial statements on 30 May 2026. A court case filed by a former contractor was pending, and the company had made no provision and only disclosed a contingent liability. On 12 May 2026, the court ruled against the company and confirmed that the company was liable for a breach committed in January 2026. What is the correct treatment in the 2025-26 financial statements?

Orion should recognise a provision and adjust its 2025-26 financial statements. The court settlement after the reporting period confirms a present obligation that existed at year end, so it is an adjusting event, and merely disclosing a contingent liability is not enough.

  1. AContinue to disclose only a contingent liability
  2. BRecognise a provision and adjust the financial statements as per Ind AS 37Correct
  3. CDisclose the judgment as a non-adjusting event without recognising a liability
  4. DRecognise the liability in 2026-27, when the judgment was delivered

Explanation

Settlement of a court case after the reporting period that confirms a present obligation at the reporting date is an adjusting event. The entity recognises a new provision under Ind AS 37 and does not merely disclose a contingent liability. The breach occurred in January 2026, so the obligation existed at the year end.

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