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

Veda Textiles Ltd. has a reporting date of 31 March 2026, and its Board approved the financial statements on 20 May 2026. On 5 May 2026, a fire destroyed a major production plant that was in working condition on 31 March 2026. How should the company treat this event in its financial statements for the year ended 31 March 2026?

The fire is a non-adjusting event, so the plant's carrying amount is not changed. The plant existed in good condition at 31 March 2026 and the fire is a condition that arose afterwards. Because the destruction of a major plant is material, the company should disclose the nature and financial effect.

  1. AAdjust the carrying amount of the plant to zero as at 31 March 2026
  2. BDo not adjust the amounts, but disclose the event as a non-adjusting eventCorrect
  3. CNeither adjust nor disclose, because the event occurred in the next year
  4. DCreate a provision for the loss in the year ended 31 March 2026

Explanation

The plant was intact at the reporting date, and the fire is a condition that arose after the reporting period. Destruction of a major production plant by fire after the reporting period is listed as a non-adjusting event that generally results in disclosure. Adjusting the plant to zero would wrongly treat the fire as evidence of a condition existing at the year end.

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