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

Sagar Pharma Ltd. closes its books on 31 March 2026, and the Board approved the financial statements on 25 May 2026. Which of the following events occurring between 1 April 2026 and 25 May 2026 should be treated as a non-adjusting event requiring only disclosure, if material?

The fire that destroyed a major production plant on 10 April 2026 is a non-adjusting event. It reflects a condition arising after the reporting period, so amounts are not adjusted but disclosure is made if material. The other events give evidence of conditions existing at 31 March 2026.

  1. AReceipt of information showing that inventory carried at cost on 31 March 2026 was later sold at a price below cost, giving evidence of its net realisable value at that date
  2. BDestruction of a major production plant by a fire on 10 April 2026Correct
  3. CSettlement of a court case on 15 May 2026 confirming that Sagar had a present obligation on 31 March 2026
  4. DDiscovery of an error showing that depreciation for the year ended 31 March 2026 was understated

Explanation

The destruction of a major production plant by fire after the reporting period is a listed example of a non-adjusting event, and it indicates a condition that arose after the period. The other three give evidence of conditions existing at the reporting date (NRV evidence, settlement confirming a present obligation, and an error), so they are adjusting.

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