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

Sundaram Textiles Ltd. closes its books on 31 March 2027, and the Board approves the financial statements on 20 May 2027. The inventory at year-end is carried at its cost of Rs 12,00,000. On 28 April 2027, the entire lot was sold for Rs 9,50,000 net of selling costs. What is the correct treatment in the financial statements for the year ended 31 March 2027?

Inventory should be written down by Rs 2,50,000 to Rs 9,50,000 in the year ended 31 March 2027. The post-year-end sale, before approval of the statements, is evidence of net realisable value at the reporting date, so it is an adjusting event.

  1. AWrite down inventory by Rs 2,50,000 to Rs 9,50,000 as an adjusting eventCorrect
  2. BKeep inventory at Rs 12,00,000 and disclose the loss as a non-adjusting event
  3. CMake no adjustment and make no disclosure
  4. DWrite down inventory by Rs 2,50,000 in the year ending 31 March 2028

Explanation

Sale of inventories after the reporting period may give evidence about net realisable value at the reporting date. The lot is sold before approval, so NRV is Rs 9,50,000. The write-down is 12,00,000 - 9,50,000 = Rs 2,50,000, recognised in the year ended 31 March 2027. Treating it as non-adjusting is wrong because it is evidence of a condition existing at year-end.

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