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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 12 April 2026 a major spinning plant was destroyed by fire; the plant was in working condition on 31 March 2026. How should the company treat this event?

The fire is a non-adjusting event. The plant was intact at year end and the fire arose afterwards, so the financial statements are not adjusted. Because the plant is major, the nature and financial effect of the event should be disclosed instead.

  1. AAdjust the carrying amount of the plant to nil in the 2025-26 financial statements
  2. BDo not adjust the amounts recognised and disclose the event as a non-adjusting event, as it is a major plant destroyed after the reporting periodCorrect
  3. CCreate a provision for the loss in the 2025-26 statements because the plant existed at year end
  4. DIgnore the event completely, as it occurred after the reporting date

Explanation

The fire occurred after the reporting period and indicates a condition that arose after that date. The destruction of a major production plant by fire is listed as a non-adjusting event that would generally result in disclosure. Adjusting the carrying amount would wrongly treat it as evidence of a year-end condition.

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