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CA Final · Financial Reporting · Ind AS 10 Events after the Reporting Period

Trishul Industries Ltd closes its books on 31 March 2026 and the Board approves the financial statements on 18 June 2026. At the reporting date, a court case claiming damages from Trishul was pending, and the company had made no provision, treating it as a contingent liability. On 5 May 2026 the court ordered Trishul to pay Rs 60 lakh for a defect in goods supplied in February 2026. Which treatment is correct?

Trishul should recognise a provision of Rs 60 lakh in the 31 March 2026 statements. The court settlement after the reporting period confirms a present obligation that existed at the reporting date, making it an adjusting event, so mere contingent liability disclosure is insufficient.

  1. AContinue to disclose a contingent liability of Rs 60 lakh and recognise nothing
  2. BRecognise a provision of Rs 60 lakh in the 31 March 2026 financial statementsCorrect
  3. CRecognise Rs 60 lakh in the year ending 31 March 2027 and disclose nothing now
  4. DDisclose the court order as a non-adjusting event without recognising a provision

Explanation

Settlement of a court case after the reporting period that confirms a present obligation at the reporting date is an adjusting event. The goods were supplied in February 2026, so the obligation existed at 31 March 2026. The entity recognises a new provision and does not merely disclose a contingent liability.

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