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

Veda Textiles Ltd closes its books on 31 March 2026, and its Board approves the financial statements on 20 May 2026. On 28 April 2026 a major production plant was destroyed by a fire that started on that date. The plant was fully operational at the reporting date. How should this be treated in the financial statements for the year ended 31 March 2026?

The fire is a non-adjusting event because the condition arose after the reporting period, with the plant intact at 31 March 2026. The amounts are not adjusted, but the nature of the event and an estimate of its financial effect are disclosed because the plant is a major one.

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

Explanation

The fire occurred after the reporting period and indicates a condition that arose after that date, so it is a non-adjusting event. Ind AS 10 lists the destruction of a major production plant by fire after the reporting period as an example that generally results in disclosure. Option A is wrong because adjusting would treat a post-period condition as if it existed at the reporting date.

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