Events Occurring After BalanceSheet Date (AS-4) T45

In such a case, it shall become an Adjustment Event under AS-4, the Asset and Liability
hountsshould be re-stated at Fair Value, and the fact that Going Concern Assumption
lost should be disclosed on the Notes to accounts.
Illustration. The accounting year of Bling Limited ended on 31st March, 2022 but the
counts, were approved on 30th April, 2022. On 15th April, 2022 afire occurred in the
ctory and office premises. The loss by fire is of such magnitude that it was not possible
Dexpectthe enterprise Bling Limited to start operation again.
State with reasons, whether the loss due to fire is an adjusting or
non-adjusting event
nd how the fact
of loss is to be disclosed by the company in context of provisions of
AS-4
before approval of
Ans. Loss due to hre occurred after the Balance Sheet date and to fire is of such a
The loss due
befnancial statement for the financial year 2021-2022. start its operations
nagnitudeitthat is not reasonable to expect that the company will In such a case, the
the Going Concern assumption is not valid or applicable.
Again. Thus,
zompany should prepare the financial statements on liquidation basis.
0.6.Explain the Event Occurring after approval of accounts.
occurIng after approval of accounts. Events occurring after the balance
Ans. Events are non
accounts by the competent authoritycompetent
sheet date and also after the approval of
material, are disclosed in the report of the
diusting events. Such events, if
has provided
authority.
SuryaLimited follows the financial year from April to March. It
0. 7.
the following information: April,
the company's advertisement was filed by aparty on 5th
() Asuit against
lakhs.
2022, claiming damages of 5
sell an immovable property for 745 lakhs in March,
aproposal to
(ii) Company sendsvalue end date. However,
book of the property is 30 lakhs as on year
2022. The
15th Apri, 2022. have
the Deed was registered on acquisition of business of another company
for
conditions were
financial resources
(iü) The terms and end of March, 2022, but the
been decided by the
amount invested 50 lakhs. month of
arranged in April, 2022. The lakhs was done by the cashier in the
amounting to 74 statements have
(iv) Theft of cash the next day after the financial
detected on
March, 2022 but was
Directors. reasons whether
been approved by the of AS-4, you are required to state with Non-Adjusting
provision Adjusting events or
Keeping in view the treated as Contingencies,
events are to be
the above
events after the balance
sheet date. a party on 5th April,
advertisement was filed byliability
company's but it was not
Ans. (i) Suit against the of 75 lakhs. It is a contingent 5th April, 2022,
2022, claiming damagesSheet date because the suit was filed on condition or
existing on the Balance date. It is a non-adjusting event because
Sheet
i.e., after the Balance at the Balance
Sheet date.
situation was not
existing March, 2022. However,
property was sent in Therefore, it is a non
an immovable
(i1) Proposal to sell contract to sell the property
in March, 2022.
there was no
finalised in
adjusting event. conditions for acquisition of business were
and However, the
(1i) In this case, terms 2022, i.e., before the date of Balance Sheet.
the month of March, arranged in April, 2022, i.e.
resources amounting to 50 lakhs were
financial
Balance Sheet. it
after the date of as at 31st march, 2022 ie.
adiustment of Assets and Liabilities is necessary
So,
is an Adjusting Event.
 in March, 2022asrelating
sale statements registered
ofaPproved property
company was
The T-46
correspondingthebythe and AS-10.Ipernd cashier. o,00,000
fromthe regarding Eventsof andBoard However,
during Q.9. company buyer
Q dsn
Balancewhich dateoccurring the the Ans. You A Q.
Erents: of Ans. Ans. cash of agreement company 8. (iv)
financial
Typesunfavourable,
10. (before income immovable
as Sale are
should ofCashier Adjusting as Shiv
2 1. AsWrite balance materially Sheet Though April, an as to Since by for required financial
aPproval
inSo, of In
should
embezzlement Directors this the required for on at the
reporting
Non-adjusting period.thAdjusting
eperiod per Deed the 31st no Das
statements the statement. Asset, on Agreement the 30th 275
entered adjustment given
ngiod.
reporpertieporting date. 2012 fact of 31stAS-4. The per
conditions to
Ind a should the be lakhs. Event March, DELHI
arr note be affected approvaladjusted only. A-one property happened year BoardSell'was
toApril,
of of 58
events thatAS-10. shown Therefore, theft embezzlement the March. state, theft
case,
those after Lakhs ended on The into
penod on be Financial Ltd. to 2022. UNIVERSITY
is
approving between are occur of the company.
by existing 22nd 2022.. an
events which after approved Events "Events reduced as cash ofthe inthe embezzled immovable 2022. is after sell
how concluded statements by
are determination it he wil necessarythein 31st PAVILION
a financial tBalance was May, The of
be 75 Sheet atthe this "3reement
those after provide theauthority after
Loss necessary
by
by is cashierbooks statements
March, cash
Occurring the "Contingenci Witheth shown Lakh Balance
date.
the made
Balance financial SERIES
reporting R6.00,000 in comes transaction2022 on
by endthe the cash t the
amournting
which the the the cashierstatements) ofyearSheet of amounting property 25th
reporting evidence in make to R6,00,000
account to, as wil before 2022. tofinancial the
are Boardreporting income amount help of financial Sheet shown sell directors.
period. case theof after asas Date" the the gain be
indicative the statementFebruary,
s for 202
per
at provisions
for company ofnotice shown
from the wil date would inits to
of of of 'Balance
statement, 31st
adjustments relating detected was decide Bal ance
period.conditions anyreporting
periodandperiod AS-. - not immovable statements the 4
Adjusting directors it the to statements
other March, is of as provi d e be lakhs
of conditions to whether the
6,00,000
are th e sal
Amount e be So,
Sheet deal t bal a nce
Non-adjusting
condition are Sheet an shown the in
entity in ended ofnot for and was
thatevents events
case favoLra those
if2022 in
additional after company of adjustmentadditional th e
nothing the AS4, date with year thsheet
Reporting immovable
yet during asthe
propert
e y
existed for of and books accoun of th e 31st Recivable and in sale year
detected
that after embezzlemen approved an year 2021-2022 at
issue. a is the existing at tBalance to the
event s compan the March, 2021 managenmenMarch, asset information to
2021l-2022
arose afthe recoveramount informatio ended registration deed 17 af
the rep date Perio property from assets financial anot her
after after by 2022 of Were Wa
lakh
end Shed the the 31s
 Chapter 8
Extraordinary Items, Prior Period Itemts. Accountin8
Estimates, Accounting Policies and Fair Value (AS-5)
0.1. Give the definitions of the following as per AS-5.
() Ordinary Activities (ii) Extraordinary Items
(iin) Prior Period Items (iv) Accounting Policies
Ans. (1) Ordinary Activities.Ordinary activities are any activities which are undertaken
by an enterprise as part of its business and such related activities in which the enterprise
engages in furtherance of, incidental to, or arising from, these activities (AS-5).
Example: King Ltd. is a softare development company operating from Deli, Recently they
have started a training institute for future softvare developers. All activities relating to training
institute will be treated as ordinary activities.
() Extraordinary Items. Extraordinary items are incomes or expenses that arise from
events or transactions that are clearlydistinct from theordinary activities of the enterprise
and, therefore, are not expected to recur frequently or regularly, (AS-5).
Example: Sale of old machinery and furniture at a profit/Aoss is an ordinary activity but Sale of
excess land adjacent to existing factory should be treated as an extraordinary item. Similarly, Loss
due toearthquake shallbe treated as an extraordinary iten. in
(ii1) Prior Period Items. Prior period items are incomes or expenses which arise
preparation of the financial
the Current period as a resuit of error or omission in the
statements of one or more prior periods (AS-5).
detected onlyin 2021-22. It is
Example: Inventory had been overstated in 2020-21 but it was
aprior period item.
Standard-1, Disclosure of Accounting
(iv) Accounting Policies. As per Accounting accounting principles and the method
Policies, "Accounting Policies refer to the specific
enterprise in the preparation and presentation
of applying those principles adopted by the
of financial statements.
items as per AS-5? Explain their accounting
0. 2. What is meant by Extraordinary
Extraordinary items are incomes or expenses
treatment.
Ans. Meaning of Extraordinary Items. activities
events or transactions that are clearly distinct from the ordinary
that arise from (AS-5).
regularly,
of the enterprise and,therefore, are not expected torecur frequently orshould be disclosed
Items: Extraordinary items
Accounting Treatnent of Extraordinary for the period. The nature
Loss as a part of Net Profit or Loss
in the Statement of Profit and in the Statement of
amount of each extraordinary item should be separately disclosedbe clearly observed.
and impact on current profit or loss can
Profit or Loss in a manner that itsrare occasions does an event or transaction gives rise to
only on
It should be noted that
an extraordinary item. so for another
transaction may be extraordinary for one enterprise but not activities. For
An events or
differences betweentheir respective ordinary extraordinary item
enterprise because of the of an earthquake may qualify as an
sustained as a result an earthquake
example, Losses
However, Claims from policy holders arising from insures against
for manyenterprises. extraordinary item tor an Insurance company that
do not qualify as an
such risks (AS-5). T-47
 circumstances,
effect
period, financial arise events
and, T48
Requirements:
Disclosure Cases:
disclosure in should period
unlessan
The Ans. 2. enterprise suchactivities.Extraordinarv which items. 2. recognised
) (b) Q. A When Components
1. theNet This Ans. Q.3.
(a) in 4.
Extraordinary
therefore, separate size, which Profit 1.Profit profit
of term
Write or
(g) () (e) (a) (c) (b) (a) Shiv
are be includes Explain
determination k Anfor Prior or the The during e.g.,statementsMeaning
after the transactions Other
Litigation Disposal
Legislative
restructuring
Restructuring e write-downs.
Intangible Disposal The
costthassets); items Profit Net
indicate arrears will nature for the or in
alternative the Statement locanss Prior Current undertaken ordisclosed Das
period nature a write-down disclosure th e enterprise loss loss or a
the which short are reversal enhance of extraordinary of period Net
current of or
income from
loss Accounting
Net
the current
payable period of Prior not settlements; of of period, from or DELHI
items be and period note`on that
items. changes long-term incident onfor Profit
of though one expected of ofitems the byordinary the theProfit should Loss UNIVERSITY
effectapproachperjod.perceived.Profit amount Prior of Period the of of and engages ordinary
or provisions.
Extraordinary are itens th e an face for or
are period to items as having inventories
of their period or
Standard Loss
current
of Neof workers Prior clearly activities
transparency expense
nature enterprise items be
t normally &t related more a investment;
and fixed of Loss: th e
such 15 Items: to ofdisclosure in activities; the determination
Loss (AS-5). does result recur activities. includedin for
to prior Period retrospective income furtherance comprises and Period:
itemsAll
items Siow distinct assets of under Statement the SERIES
in as tonot Prior of to such partas requires
the
ncluded a a periods
prior of
frequently items an net in period
mannerperiod Items. reportingand and
on
profitSucn result include error period fromn enterprise (i.e., is
profit effect
realisable items
relevant Ordinary
the periods, are expense business its of of or
items items of (AS-5). or th e application; Property, of,. as
current or in that items incomes
or should or
incidental following
Profit permitsof per
determination revision other. omission ordinary income changes
Loss. in should regularly, and toloss activities of
their are value is incomeAS-5.
the are nÍt explain fTOm and
profit In adjustments or be otherwise
(AS-5).
Statement impact determined of incomes
reversal Plant
and components,
either be wages in activities expenses necessary
as disclosed Loss:accounting
estimates in of
or the (AS-5). well ordinary to, and are
Separately i and expense. the or such
Net and
loss case, ofdisclosed on of incomes
the with preparation or any as performance arising profit
expense
(As-5). the of Net necessitated ofthat Equipment reversal separately.
Profit profit current in expernses the
in activities related
retrospect the provision the each or
from, or \oss
and enterprarise followi expense which
objective or curte of activiti ofwhi
Lo Lo pro" ofwhid tor
t tron suc are the
fr and Thof H a
 periods,effect in in as Extraordinary
Profit
from Accounting item mesult of if on accounting
estimate.in
círcumstances
change
Extraordinary definition
the i t e m the decided
accounts preparing of Requirements:
2. Disclosure 1. profit
anordinary
Effect For
Classification estimate, changesChange Example whi
latest ch busin ess
In Ans. Shiva
the Example If The accounting
(b) (a) ordinary and Contingencies.
of 5. 4 3 2 1. Aonting Ans. Extraordinary
year the relevant it in example, estimated.
or credit should the The The of or Estimate Estimates
Estimates intormation cannot Meaning What
in As
prior to Ltd. is nature Loss in
newoccur Provision
of activities.
given were change loss
activity. estimate by
an2022-23. ofper
increase the
impracticable currernt periodperiod
1: activities, information, Accounting Accounting be isItems,
a
accounting Change as if as
accounting item and case,PriorAS-5 period not period financial created be and estimate anwas of regardingits of of ofprecisely estimate ofmeant
disciosed. extraordinary Effect or
nature for many Prior
Subsequently,
decided approved amount
period, of of in aCcounting should
Similarly, Prior Warranties, Inventory
useful likelyavailable. Accounting
nor item item?
Shivarevision the
allowed tAccounting
he the by
Period
a in to then used of financial
orstandard, provision provision
statementAccounting change
change, should Estimate. Estimates: accounting
estimatePrior a quantify or of previously
a beperiod does more the
Change life Bad measured. is
an
to Ltd . an by change of debts. Items,
of and which a item estimate
if classified circumstances obsolescence.
not approximation Estimate:
create
Extraordinary an the change estimate be an experience
item.
Depreciable
Restructuriuig items
whichperiod created the can fo r
andincluded ifAccounting in As
financial or the is future the shouBd bring
for
company Estimate Board to fEstimate inAccounting The cannot estimate Acc.
6.5% this 6.5% the bad amount,expected in change which
the using per Estimates,
has item. 3%% an in the.Estimate. estimation As
till Accounting the or AS-5,
assets.
provision. on year and periods, inone be on
a Asprovision item. doesrevision thecapacity accounting affects the
classifiedestimate was theadjustment
subsequentwhich of be a as
material revised Debtors2022-23. doubtful this to same An costs, result per
per not date have determination more or previousiy Estimate. tmeasured
he Acc
be fact if estimate Gratuity. process AS-5?
AS-5, As for bring
the the the estimate
which classification the amount of Policies
effect considered theof astheof should estimate a periods. as th e
per bad Subsequentiy, debts material changeperiod an developments.
thestimate
e th e on The withinestimate involves with Explain
decision.
customers, included may uncertainties &
should AS-5, and
nature 31st be
extraordinary wasshould
of effect of Fair
adjustment The businessprecision the
doubtful as March, 3%
disclosed. which affectsonly; Net previously
effect in
the was have
Value
be thisbased an or effect also of
definition judgement
While profit in the effect
disclosed. and is extraordinary the onon inhas both. profit a Thebased, to (AS-5)T49
on Debtors of beStatement change transaction inherent but
amount neither debts within applyingcompany 2023. subsequent a item. be
changed review a material aclassified
orincluded revision revised or
change
loss or
can change of
th e The loss in of as based only
of an for in in: ofan an in
a
 should
policy does it
from
is
Change regarding AS-1?
necessary
not Ans. Q. policies
enterprise.
are: policies
thepolicies
one (i) 2.
of presentation the inending
change trom inMarch, 2023. Board T-50Shiv
() In 7. (c) Considerations 1. Ans. the Q. provision The
meeting of
preparing
financial
while
such (b) Secondary
(a) Primary method Accounting Ans. Explain Example 2:
mean period financial orAny
presenting Disclosure What
which selection 6. 3,00,000
in statements accounting All though Substance
their
ismaterial Prudence be losses which is As of
Accounting future significant purchased Materiality. Prudence. that What on in As Directors
made
onlybe that that amount change disclosed ofper 31st an per the with
are economic of Das
to conditions he but
Considerations. Consideration.
show the applying is
accounting for
the statements period
financial AS-1, of
meant March, to
Policies", AS-5,treatment Employees
Accountinganother. and the of the will on over for anticipated means, Prudence financial inaccounting employees company created ADELHI
same is in policies a the 74,00,000 on
not tfinancial
haccounting
e atAccounting Disclosurebecome reality hire form.one's inAll ti Accounting "Net
the statements.
ueselection those by2023. 15th
Policies. should
accounting one apurchase, material
Anticipate and estimate th e of UNIVERSITY
accounting ascertainable,To is change concern statements accounting Profit statements
Welfare for
as the and financial It means increaseis suchApril,
Policies compare affected place. owner means fair The principlespolicies. welfare
per profits Secondary neither
It alsostatements requirements it not items view primary of Policies revision
or 2023.
policiesPolicies.
AS-1: in may Accounting which Loss
on
of isstatements. that making
no should Association, to aSERIES
policies
cannot assumed
is policies
by be accounting shotwn
the ar e of policies a in provision
th e be whichprofit adopted for in
the disclosed.
the such machine transactions not
considerations the
consideration
refer willprior the 4,00,000. 2022-23. yearthe
ngures adopted
should Following immaterial
basis th e
financial
fact as recognised provision financial be provision
be be change which affect and preparedPolicies: as affect item
that
should regarding asset
anof
It bythe to per period, it
changed. the of
followed of
Amount bebypolicies after their should provide the nor was
accounting has inshould for the position specific AS-5? statemernt
this should disclosed an are paying legal enterprise Net for Prior accounts
decided 3,00,000
be a the another.decisions until for for on in an
should
the Employees
year
A yeardisclosed. material enterprise accounting booksform. be not for all the the the extraordinary
Explain profit On
also by all berealised. all
expected and acCounting Period for
change with disclosure
as th e recorded selection basis
selection to 31st
afterpolicies which be
instalments. the
ofFor pOssible
the financial in for were
beeffect part of the or Items the increase Employees
in the made
in hire-purchaser, example, case the of the
year. disclosed. In loss
expenses
Welfare approved March,
previous preparing of policies such preparation year
an are an in
the as
on users Liabilities
that losses.other of of principles
consideration and
However,
Accounting item the requirements performance foritem. the
consistert per ifa the accounting accounting accounting ended 2023,
financial the Changes amount
Where curent in
an word,
It by Welfate
yeat the and AS5 p
as machìnt basis iteshould
er evan m and and and i the in
it of a
 Market
Value.
oli es asroe nk n Rlosses Labüits othe hAns.
the tine tansubsequent the tht
hesteport aFair s
trevaluation t
traded
subsequently, and be ength in narketDould adopted. hangeeriods. Jeriod ndicated.
isIccounting tatements he Acounting
Standard
he or
Determination
Determination Advantages In Use
purchased Thus an In (n) the ounting Os Eitraondinarv 1
caseValue there the Q.9. adjustrments Ans.financial
4. open When fit the fthe lf
3. 2. 1. the of Fair whopaYticipants
beAs but effect ()
Explain
an words received Write the is
subsequentlydetermination isFairwordsreport Fair itFairWhen per policies
which ofpolicyWhen consideredadoption adoption
difficult is impairment asset
entity model
is Fair isValue are and fact the of the statements
Value Value Valuea of
not Value. noor fully International a ltenms,
such it the true Fair compulsion sold
unrestricted of
to
Short of change suchresultng the
of of Fair recognised. at is
period which the
helps meosure applies
th e as informed
is Dolphy atsell such which disclosure otofa Prior
Fair as Fair to canaccounting
assetaccountingValue rational
when the Notereasonably change change that
is Value: stated Fair a
calculate
is be the losses Fair measurement an a has in of ditterent
ditferent Period
quiteMchine, asset, change has which trom has the the
Value Value a
calculated at accounting the Value both market D on
difficult business Fair of Value material no is enterprise. Items,
in to and and Souza, Financial
in
revaluation enter not or Fair not requirement
such
material ahas change
difficult. of
th e income.
reflects
is AS-10 the expected material such accounting
Computer for Value
helpful the isunbiased between paid material accounting
an less used parties under Value.
should ascertainable,
change
fair
an survive. into date.
"Fair Reporting effect change would Acc.
item process. for the is Balance any and to
item value. all and applied, for the knowledgeable any transfer beeffect effect Estimates,
for actual model, Ind estimate
(i.e., Market to effect as
which etc. subsequently transaction
assets compulsion properly have if result policy
sold types not a Sheet. in material, is to policy
is On AS-16. buyer Standard a on a made, should
is
more
business valuations
at income Value liability change
in in
initially th e of then whose athelater wholly
neither a Fair of material
disclosed current a requiredis is Acc.
assets. higher For and price financial
period(s). to
difficult. other as from should be
reflect morereauired Policies
Value toand is (IFRS), in ordisclosed. in
in of accumulated asset
per Carrying seller)transact".willing the
sold in hand, Nodifficult anare at an in accounting period.appropriate
carrying may AS-10 any which price effect
in
statemernts part, the be by &
a enterprise. more carried freely
orderly Fair
the for
inmarket doubt, person. If shown statute Fair
a for be
parties that a effect compliance
market
times accurate. it amount an transactionValue period inchange that The Any Value
some amount. depreciation
different will at agree would a policies.
in asset dealing later for fact of impact in presentato or
but some because In historical is such change (AS-5)
measure the in the
initially not other other is on is be the isshould
based agreed period
assets In from e
thlikely at between price which currentmade change. financial of, witn
traded assets other it words cost, price arm' s n
nor will the and and on that an an T-51
it to to
the or in be a