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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 major customer, Kiran Garments, was declared bankrupt. Veda had a trade receivable of Rs 40 lakh from Kiran at 31 March 2026, with no loss allowance against it. Kiran's financial difficulties had been building up over several months. How should Veda treat this event?

Veda should adjust its statements for the year ended 31 March 2026. A customer's bankruptcy after the reporting period usually confirms the receivable was credit-impaired at the reporting date, so it is an adjusting event and the loss is recognised in that year.

  1. AAdjust the financial statements, because the bankruptcy usually confirms the customer was credit-impaired at the reporting dateCorrect
  2. BOnly disclose the bankruptcy as a non-adjusting event, because it happened after 31 March 2026
  3. CRecognise the loss in the next year's financial statements since the bankruptcy date falls in that year
  4. DIgnore the event because the receivable was legally valid on 31 March 2026

Explanation

The bankruptcy of a customer after the reporting period usually confirms that the customer was credit-impaired at the end of the reporting period, and so it is an adjusting event. Veda must recognise the impairment loss in the year ended 31 March 2026. Treating it as non-adjusting is wrong because the underlying condition (deteriorating finances) existed at the reporting date.

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