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

Sundaram Textiles Ltd. has a reporting date of 31 March 2027, and its Board approved the financial statements on 20 May 2027. On 28 April 2027, a major customer that owed the company ₹18 lakh at 31 March 2027 was declared bankrupt. How should this be treated in the financial statements for the year ended 31 March 2027?

The bankruptcy is an adjusting event. Under Ind AS 10, a customer's bankruptcy after the reporting period usually confirms the customer was credit-impaired at the reporting date, so the company must adjust the recognised receivable amount instead of merely disclosing the event.

  1. AAs an adjusting event, because the bankruptcy usually confirms the customer was credit-impaired at the reporting dateCorrect
  2. BAs a non-adjusting event, because the bankruptcy occurred after the reporting date
  3. COnly a note on the customer's bankruptcy, with no change in recognised amounts
  4. DNot recorded in this year at all, and recognised in the next year's accounts

Explanation

Ind AS 10 gives the bankruptcy of a customer after the reporting period as an example of an adjusting event. It usually confirms that the customer was credit-impaired at the end of the reporting period. The receivable is therefore adjusted for the impairment. Treating it as non-adjusting ignores that the condition existed at 31 March 2027.

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