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

Sagar Textiles Ltd closes its books on 31 March 2026, and its Board approves the financial statements on 20 May 2026. On 10 May 2026 a major customer, Kiran Garments, was declared insolvent. The receivable of Rs 40 lakh from Kiran Garments was outstanding at 31 March 2026, and its deteriorating finances were not known earlier. How should Sagar Textiles treat this?

Sagar Textiles should adjust its financial statements. A customer's bankruptcy after the reporting period usually confirms the receivable was credit-impaired at the reporting date, so it is an adjusting event requiring the impairment to be recognised, not just disclosed.

  1. AAdjust the financial statements, because the insolvency usually confirms the receivable was credit-impaired at the reporting dateCorrect
  2. BOnly disclose the insolvency as a non-adjusting event, because it occurred after the reporting date
  3. CIgnore it completely, because the event happened after 31 March 2026
  4. DRecognise the loss in the next year's financial statements and make no disclosure now

Explanation

Customer bankruptcy 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 must be adjusted. Treating it as merely disclosable is wrong because the condition (credit impairment) existed at the reporting date.

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