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CMA Intermediate · Corporate Accounting and Auditing · Events after the Reporting Period (Ind AS 10)

Sagar Textiles Ltd has a reporting date of 31 March 2027. On 20 April 2027 its Board proposed a final dividend on equity shares for the year ended 31 March 2027, and approved the financial statements on 15 May 2027. Under Ind AS 10, how should the proposed dividend be treated in the financial statements for the year ended 31 March 2027?

The proposed dividend is not recognised as a liability at 31 March 2027. The Board proposed it after the reporting period, so no present obligation existed at the reporting date. It is therefore not an adjusting event and does not reduce retained earnings for that year.

  1. AAs a liability recognised at 31 March 2027, since it relates to profits of that year
  2. BAs a provision, because the Board's proposal is a present obligation
  3. CAs an adjusting event, reducing retained earnings at the reporting date
  4. DNot recognised as a liability at the reporting date, because no obligation existed thenCorrect

Explanation

A dividend proposed or declared after the reporting period does not create an obligation at the reporting date. No liability exists at 31 March 2027, so it is not recognised in that year's statements. Treating it as a liability or an adjusting event would wrongly recognise an obligation that did not exist at the reporting date.

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