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

Sagar Textiles Ltd closed its books on 31 March 2026, and the Board approved the financial statements on 20 May 2026. On 10 April 2026, a customer, Kalyan Garments, was declared bankrupt. The customer owed Rs 8 lakh for goods sold in February 2026, and no credit loss had been provided. How should Sagar Textiles treat this?

The financial statements should be adjusted. A customer's bankruptcy after the reporting period usually confirms that the customer was credit-impaired at the reporting date, so it is an adjusting event under Ind AS 10. Mere disclosure would be wrong because the condition existed at the year end.

  1. AAdjust the financial statements to recognise the credit impairment of the receivableCorrect
  2. BOnly disclose the bankruptcy as a non-adjusting event
  3. CIgnore it, as the bankruptcy occurred in the next financial year
  4. DRecognise the loss in the financial year 2026-27 only

Explanation

Under Ind AS 10, the bankruptcy of a customer after the reporting period usually confirms that the customer was credit-impaired at the end of the reporting period. It is therefore an adjusting event and the receivable is adjusted. Treating it as only a disclosure is wrong because it provides evidence of a condition that existed at the reporting date.

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