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

Shakti Engineering Ltd has a year-end of 31 March 2027. Its Board approved the financial statements on 30 June 2027. Which of the following events occurring in the interval is a non-adjusting event that would generally be disclosed?

The announcement of a major restructuring after the reporting period is a non-adjusting event and is generally disclosed. The other events give evidence of conditions existing at year-end, such as customer insolvency, inventory net realisable value and a settled obligation, so they require adjustment.

  1. AThe Board announced a major restructuring on 15 May 2027Correct
  2. BA customer with a large receivable at 31 March 2027 was declared bankrupt on 10 May 2027
  3. CInventories held at 31 March 2027 were sold in April 2027 below cost, indicating lower net realisable value
  4. DA court case pending at year-end was settled on 5 June 2027 confirming an obligation existing at 31 March 2027

Explanation

Announcing or commencing implementation of a major restructuring is a listed example of a non-adjusting event that generally results in disclosure. The customer bankruptcy, the sale of inventories below cost and the settlement confirming a year-end obligation each provide evidence of conditions at the reporting date and are adjusting events.

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