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

Tanvi Pharma Ltd, with a reporting date of 31 March 2027, had profit after tax of ₹80 lakh and was prepared on a going concern basis. Before approval, management became aware of events after the reporting period creating a material uncertainty that may cast significant doubt on its ability to continue as a going concern, but management has not decided to liquidate. Which treatment is correct?

The company should make the going concern uncertainty disclosures required by Ind AS 1. Ind AS 10 says the events or conditions requiring such disclosure may arise after the reporting period. A change to a non-going concern basis is not needed because management has not decided to liquidate.

  1. AChange to a liquidation basis, since uncertainty exists
  2. BMake the disclosures required by Ind AS 1, as events or conditions requiring them may arise after the reporting periodCorrect
  3. CMake no disclosure, as the uncertainty arose after the reporting period
  4. DReduce profit after tax by the estimated loss and make no disclosure

Explanation

Disclosures required by Ind AS 1 apply if management is aware of material uncertainties that may cast significant doubt on going concern, and the events or conditions may arise after the reporting period. Changing the basis requires a decision to liquidate or no realistic alternative, which has not occurred. Hence disclosure, not a change of basis.

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