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

Veda Pharma Ltd has a reporting date of 31 March 2026, and its Board approved the financial statements on 15 May 2026. On 25 April 2026, a fire destroyed a major production plant that was operating normally at 31 March 2026. The loss is material. What is the correct treatment?

Veda Pharma should not adjust the amounts, but should disclose the event and its estimated financial effect. The fire after the reporting period indicates a condition that arose after year end, so it is a non-adjusting event under Ind AS 10 that is generally disclosed when material.

  1. AAdjust the carrying amount of the plant to nil in the 2025-26 financial statements
  2. BDo not adjust the amounts, but disclose the nature of the event and an estimate of its financial effectCorrect
  3. CNeither adjust nor disclose, as the fire occurred in the next year
  4. DRecognise a provision for the loss at 31 March 2026

Explanation

Destruction of a major production plant by fire after the reporting period is listed as a non-adjusting event. The condition (fire) arose after the reporting date, so amounts are not adjusted. Because the event is material, disclosure is generally made. Adjusting to nil is wrong as the plant existed at the reporting date.

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