AS 4 – Contingencies & EOAB

Chapter 10 : AS 4 – Contingencies & EOAB

CHAPTER 10
AS 4 - CONTINGENCIES AND EVENTS OCCURRING AFTER
THE BALANCE SHEET DATE
SCOPE:
Accounting Standard 4 ‘Contingencies and Events Occurring after the Balance Sheet Date’ covers
accounting treatment of
(i) contingencies and
(ii) events occurring after the balance sheet date.
However, pursuant to AS 29, “Provisions, Contingent Liabilities and Contingent Assets’ becoming
mandatory in respect of accounting periods commencing on or after 1.4.2004, all paragraphs of this
standard that deal with contingencies stand withdrawn except to the extent they deal with impairment
of assets not covered by other Indian Accounting Standards. For example, impairment of receivables (i.e.
provision for bad and doubtful debts) would continue to be covered by AS 4.

CONTINGENCIES
Definitions: A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will
be known or determined only on the occurrence, or non-occurrence, of one or more uncertain future
events.
Main Principles

 The amount of a contingent loss should be provided for by a charge in the statement of profit
and loss if:
a) it is probable that future events will confirm that, after taking into account any related
probable recovery, an asset has been impaired or a liability has been incurred as at the
balance sheet date, and
b) a reasonable estimate of the amount of the resulting loss can be made.
 The existence of a contingent loss should be disclosed in the financial statements if either of the
conditions in paragraph 10 is not met, unless the possibility of a loss is remote.
 Contingent gains should not be recognised in the financial statements.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE:

Events occurring after the balance sheet date means:
 Those events which are significant events.

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 Those events which occur between the balance sheet date and the date on which the financial
statements are approved by the Board of Directors in the case of a company, and, by the
corresponding approving authority in the case of any other entity.
 These events may be favourable or unfavourable.

TYPES OF EVENTS OCCURRING AFTER THE BALANCE SHEET DATE:

ADJUSTING EVENTS:
An event after the balance sheet may require adjustment of reported values of assets, liability, expenses,
income and equity for the accounting period, if the event is such as to provide further evidence of
conditions that existed at the balance sheet date. Such events are adjusting events.
Examples – adjusting events
Ex 1 A loss on a trade receivable account which is confirmed by the insolvency of a customer which
occurs after the balance sheet date.
• Event occurred – insolvency of customer
• Condition existing – provision for doubtful debt
This is an adjusting event after the end of the reporting period.
Ex 2 A fraud during the accounting period is detected after the balance sheet date but before the
approval of financial statements
• Event occurred – Detection of fraud

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• Condition existing – fraud happened during the accounting period

This is an adjusting event after the end of the reporting period.
Ex 3 An entity gives warranties at the time of sale to purchasers of its products. On 31 December 20X5
an entity assessed its warranty obligation to be ₹ 100,000. Immediately before the 31 December
20X5 annual financial statements were authorised for issue, the entity discovered a latent defect
in one of its lines of products (ie a defect that was not discoverable by reasonable or customary
inspection). As a result of the discovery, the entity reassessed its estimate of its warranty
obligation at 31 December 20X5 at ₹ 150,000.
Ans: The event occurred —discovery of the latent defect—
The condition existing—the latent defect—existed in products sold before 31 December 20X5.
This is an adjusting event after the end of the reporting period.
Ex 4 A Ltd. Agreed in principle to sell a plot of land on 18 March 2012 at a price to be determined by
an independent valuer. Pending the agreement for sale and due to non-receipt of valuers report,
the sale of land could not be completed up to the accounting year end i.e. 31 March 2012. The
Company received the report on 07 April 2012 and the agreement was signed on 10 April 2012.
The financial statements were approved by the board on 12 May 2012. Is it an adjusting event?
Ans: Event occurred – Signing of the agreement for sale of land
Timing of event – between balance sheet date and date of approval by the board. Hence, it’s an
event occurring after the balance sheet date
Condition existing – Company agreed in principle to sell the plot of land
Hence, it is an adjusting event and the Company should record sale transaction in books as on 31
March 2012
NON-ADJUSTING EVENTS:
Event which are indicative of conditions that arose subsequent to the balance sheet date are non-
adjusting event. Such events do not justify change in the reported values of assets, liabilities, expenses,
income or equity.
Such events, if they represent material changes and commitments affecting financial position of the
enterprise, should be disclosed in the report of approving authority, i.e. Directors’ Report in case of
companies and report of corresponding approving authority in case of other entities.
Example– non adjusting events
Ex 5 A decline in market value of investments between the balance sheet date and the date on which
the financial statements are approved.
Ans: Ordinary fluctuations in market values do not normally relate to the condition of the investments
at the balance sheet date, but reflect circumstances which have occurred in the following period.
It is a non-adjusting event. Hence, only disclosure is required.
Ex 6 An announcement after balance sheet date but before approval of financial statement, of a
formal plan to discontinue an operation does not justify adjustment of financial statement

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Ans: It is a non-adjusting event. Hence, only disclosure is required.

Ex 7 An earthquake destroyed a major warehouse of C Ltd. on 20 April 2012. The last accounting year
ended on 31 March 2012 and the accounts were approved on 08 May 2012.
Ans: Event occurred – Destruction of major warehouse
Timing of event – between balance sheet date and date of approval by the board
Condition existing – None. The earthquake did not exist on the balance sheet date.
Hence, the destruction of warehouse is a non-adjusting event. The report of directors must
disclose the fact of earthquake together with estimate of loss.
Ex 8 A company follows April-March as its financial year. Sometimes the company receives cheques
dated 31 March or before, after 31 March but before approval of financial statements. It
recognizes such cheques by debiting Cheques in hand A/c and crediting the Debtors A/c. The
Cheques in hand is shown in the balance sheet as an item of cash and cash equivalents. All the
Cheques in hand are presented to bank in the month of April and are also realized in the same
month in the normal course after deposit in the bank.
Ans: Event occurred – Receipt of cheques
Timing of event – between balance sheet date and date of approval by the board
Condition existing – None. The cheques were received after the balance sheet date
Hence, the collection of cheques is not an adjusting event.
Recognition of cheques in hand is therefore not consistent with the requirements of AS 4.
Also, it does not represent material change or commitments affecting financial position and so
no disclosure in Directors’ Report is necessary.
Ex 9 On 1 March 2011 an entity’s financial statements for the year ended 31 December 2010 were
authorised for issue. At 31 December 2010 the entity had significant foreign currency exposures.
By 1 March 2011 a significant loss had been incurred on these exposures because of a material
weakening of the entity’s functional currency against the foreign currencies to which it is
exposed.
Ans: The event—Deterioration of the exchange rate
The Condition existing – None.
This a non-adjusting event after the end of the reporting period. It is indicative of conditions that
arose after the end of the reporting period. The decline in exchange rate does not usually relate
to conditions that existed at the end of the reporting period, but reflects circumstances that have
arisen subsequently (ie the exchange rate at the end of the reporting period took account of
conditions that existed at that date).
Ex 10 An entity gives warranties at the time of sale to purchasers of its products. On 31 December 2015
an entity assessed its warranty obligation to be ₹ 100,000. The latent defect was discovered on
31 March 2016, after the 31 December 2015 annual financial statements were authorised for

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issue. In April 2016 the entity paid ₹ 150,000 to transfer the obligation to an independent third
party. Comment
Ans: The latent defect is not an event after the end of the reporting period because it was discovered
after the 2015 financial statements were authorised for issue.
The ₹ 100,000 obligation for the warranty provision was measured and reported in good faith in
the entity’s 31 December 2015 annual financial statements. The additional ₹ 50,000 not provided
for at 31 December 2015 is a change in accounting estimate. It is recognised as an expense in
determining the profit or loss for the three-month period ended 31 March 2016. Thus, it will be
included in profit or loss in the 2016 financial statements.

EVENT THAT INDICATES THAT THE GOING CONCERN ASSUMPTION IS NOT APPROPRIATE :
An event occurring after the balance sheet date shall be an adjusting event even if it does not reflect any
condition existing on the balance sheet date, if the event is such as to indicate that the fundamental
accounting assumption of going concern is no longer appropriate.
A deterioration in operating results and financial position, or unusual changes affecting the existence or
substratum of the enterprise after the balance sheet date (e.g., destruction of a major production plant
by a fire after the balance sheet date) may indicate a need to consider whether it is proper to use the
fundamental accounting assumption of going concern in the preparation of the financial statements.
Suppose a fire occurred in the factory and office premises of an enterprise after 31/03/11 but before
approval of financial statement of 2010-11. The loss on fire is of such a magnitude that it is not
reasonable to expect the enterprise to start operations again. Since the fire occurred after 31/03/11, the
loss on fire is not a result of any condition existing on 31/03/11. Yet, the loss should be recognised in the
statement of profit and loss for 2010-11 and the assets lost should be written off from the balance sheet
dated 31/03/11.

PROPOSED DIVIDEND:
If an enterprise declares dividends to shareholders after the balance sheet date, the enterprise should
not recognise those dividends as a liability at the balance sheet date unless a statute requires otherwise.
Such dividends should be disclosed in notes.

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Events occurring after the balance sheet date

Adjusting Events Non-Adjusting Events

Event that indicate

Event that provide that the fundamental No adjustment is
further evidence of accounting required but only a
conditions that assumption of going disclosure is
existed at the concern is not required in the
balance sheet date; appropriate. report of the
approving
authority

Loss should be accounted for and assets and liabilities

should be adjusted in the finacial statements

DISCLOSURE REQUIREMENTS OF AS-4:

When the events occurring after the balance sheet date are disclosed in the report of the approving
authority, the following information should be provided:
(a) The nature of the event;
(b) An estimate of the financial effect or a statement that such an estimate cannot be made.

TEST YOUR KNOWLEDGE

MCQs
1. Cash amounting to ₹ 4 lakhs, stolen by the cashier in the month of March 20X1, was detected in
April, 20X1. The financial statements for the year ended 31st March, 20X1 were approved by the
Board of Directors on 15th May, 20X1. As per Accounting Standards, this is _ for the financial
statements year ended on 31st March, 20X1.

(a) An Adjusting event.

(b) Non-adjusting event.

(c) Contingency.

(d) Provision

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2. As per Accounting Standards, events occurring after the balance sheet date are

(a) Only favourable events that occur between the balance sheet date and the date when
the financial statements are approved by the Board of directors.

(b) Only unfavourable events that occur between the balance sheet date and the date when
the financial statements are approved by the Board of directors.

(c) Those significant events, both favourable and unfavourable, that occur between the
balance sheet date and the date on which the financial statements are approved by the
Board of directors.

(d) Those significant events, both favourable and unfavourable, that occur between the
balance sheet date and the date on which the financial statements are not approved by
the Board of directors.

3. AS 4 does not apply to

(a) Obligation under retirement benefit plans.

(b) Commitments arising from long term lease contracts.

(c) liabilities of life assurance and general insurance enterprises arising from policies issued

(d) Both (a) & (b).

4. A Ltd. sold its building for ₹ 50 lakhs to B Ltd. and has also given the possession to B Ltd. The book
value of the building is ₹ 30 lakhs. As on 31st March, 20X1, the documentation and legal
formalities are pending. For the financial year ended 31st March, 20X1

(a) The company should record the sale.

(b) The company should recognise the profit of ₹ 20 lakhs in its profit and loss account.

(c) Both (a) and (b).

(d) The company should disclose the profit of ₹ 20 lakhs in notes to accounts.

Ans:
1. (a); 2. (c); 3. (d); 4. (c);

Practical Questions
QUESTIONS FROM ICAI STUDY MATERIAL
Q1: In X Co. Ltd., theft of cash of ₹ 5 lakhs by the cashier in January, 20X1 was detected only in May,
20X1. The accounts of the company were not yet approved by the Board of Directors of the
company.
Decide whether the theft of cash has to be adjusted in the accounts of the company for the year
ended 31.3.20X1.

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Ans: As per AS 4 (Revised) ‘Contingencies and Events occurring after the Balance Sheet Date’, an event
occurring after the balance sheet date may require adjustment to the reported values of assets,
liabilities, expenses or incomes.
If a fraud of the accounting period is detected after the balance sheet date but before approval
of the financial statements, it is necessary to recognise the loss amounting ₹ 5,00,000 and adjust
the accounts of the company for the year ended 31st March, 20X1.
Q2: An earthquake destroyed a major warehouse of ACO Ltd. on 20.5.20X2. The accounting year of
the company ended on 31.3.20X2. The accounts were approved on 30.6.20X2. The loss from
earthquake is estimated at ₹ 30 lakhs. State with reasons, whether the loss due to earthquake is
an adjusting or non-adjusting event and how the fact of loss is to be disclosed by the company.
Ans: AS 4 (Revised) “Contingencies and Events Occurring after the Balance Sheet Date”, states that
adjustments to assets and liabilities are not appropriate for events occurring after the balance
sheet date, if such events do not relate to conditions existing at the balance sheet date. The
destruction of warehouse due to earthquake did not exist on the balance sheet date i.e.
31.3.20X2. Therefore, loss occurred due to earthquake is not to be recognised in the financial
year 20X1-20X2.
However, according to the standard, unusual changes affecting the existence or substratum of
the enterprise after the balance sheet date may indicate a need to consider the use of
fundamental accounting assumption of going concern in the preparation of the financial
statements. As per the information given in the question, the earthquake has caused major
destruction; therefore, fundamental accounting assumption of going concern would have to be
evaluated. Considering that the going concern assumption is still valid, the fact of earthquake
together with an estimated loss of ₹ 30 lakhs should be disclosed in the report of the approving
authority for financial year 20X1-X2 to enable users of financial statements to make proper
evaluations and decisions.
Q3: A company has filed a legal suit against the debtor from whom ₹ 15 lakh is recoverable as on
31.3.20X1. The chances of recovery by way of legal suit are not good as per legal opinion given
by the counsel in April, 20X1. Can the company provide for full amount of ₹ 15 lakhs as provision
for doubtful debts? Discuss.
Ans: As per AS 4 (Revised) “Contingencies and Events Occurring After the Balance Sheet Date”, assets
and liabilities should be adjusted for events occurring after the balance sheet date that provide
additional evidence to assist the estimation of amounts relating to conditions existing at the
balance sheet date. In the given case, company should make the provision for doubtful debts, as
legal suit has been filed on 31st March, 20X1 and the chances of recovery from the suit are not
good. Though, the actual result of legal suit will be known in future yet situation of non-recovery
from the debtors exists before finalisation of financial statements. Therefore, provision for
doubtful debts should be made for the year ended on 31st March, 20X1.
Q4: In preparing the financial statements of R Ltd. for the year ended 31st March, 20X1, you come
across the following information. State with reasons, how you would deal with this in the financial
statements:

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The company invested 100 lakhs in April, 20X1 before approval of Financial Statements by the
Board of directors in the acquisition of another company doing similar business, the negotiations
for which had started during the year.
Ans: AS 4 (Revised) defines "Events Occurring after the Balance Sheet Date" as those significant
events, both favourable and unfavourable, that occur between the balance sheet date and the
date on which the financial statements are approved by the Approving Authority in the case of a
company. Accordingly, the acquisition of another company is an event occurring after the
balance sheet date. However, no adjustment to assets and liabilities is required as the event does
not affect the determination and the condition of the amounts stated in the financial statements
for the year ended 31st March, 20X1. The disclosure should be made in the report of the
approving authority of those events occurring after the balance sheet date that represent
material changes and commitments affecting the financial position of the enterprise, the
investment of ₹ 100 lakhs in April, 20X1 for the acquisition of another company should be
disclosed in the report of the Approving Authority to enable users of financial statements to make
proper evaluations and decisions.
Q5: A Limited Company closed its accounting year on 30.6.20X1 and the accounts for that period
were considered and approved by the board of directors on 20th August, 20X1. The company
was engaged in laying pipeline for an oil company deep beneath the earth. While doing the boring
work on 1.9.20X1 it had met a rocky surface for which it was estimated that there would be an
extra cost to the tune of₹ 80 lakhs. You are required to state with reasons, how the event would
be dealt with in the financial statements for the year ended 30.6.20X1.
Ans: AS 4 (Revised) on Contingencies and Events Occurring after the Balance Sheet Date defines
'events occurring after the balance sheet date' as 'significant events, both favourable and
unfavourable, that occur between the balance sheet date and the date on which financial
statements are approved by the Board of Directors in the case of a company'. The given case is
discussed in the light of the above-mentioned definition and requirements given in AS 4
(Revised). In this case the incidence, which was expected to push up cost, became evident after
the date of approval of the accounts. So it is not an 'event occurring after the balance sheet date'.
Q6: While preparing its final accounts for the year ended 31st March, 20X1 a company made a
provision for bad debts @ 5% of its total trade receivables. In the last week of February, 20X1 a
trade receivable for ₹ 2 lakhs had suffered heavy loss due to an earthquake; the loss was not
covered by any insurance policy. In April, 20X1 the trade receivable became a bankrupt. Can the
company provide for the full loss arising out of insolvency of the trade receivable in the final
accounts for the year ended 31st March, 20X1?
Ans: As per Accounting Standard 4, Assets and Liabilities should be adjusted for events occurring after
the balance sheet date that provide additional evidence to assist estimation of amounts relating
to conditions existing at the balance sheet date.
So full provision for bad debt amounting to ₹ 2 lakhs should be made to cover the loss arising due
to the insolvency in the Final Accounts for the year ended 31st March, 20X1. It is because
earthquake took place before the balance sheet date.

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Had the earthquake taken place after 31st March, 20X1, then this would have been treated as
non-adjusting event and only disclosure required as per AS 4 (Revised), would have been
sufficient.
Q7: Y Ltd. has book debts and has a doubt over recoverability of some of the book debts. The amount
that cannot be recovered is not quantifiable. Thus, Y Ltd. is of the opinion that provision for
doubtful debts should not be created. Y Ltd. creates provision for certain other expenses on
estimated basis.
Whether contention of Y Ltd. is correct?
Ans: As per AS 4, "Contingencies and Events Occurring After the Balance Sheet Date" if it is likely that
a contingency will result in a loss to an entity then it should create provision for that contingency
on the estimated basis.
Based on the above, the contention that provision for doubtful debt is not be created merely
because the amount is not quantifiable is not correct. Hence Y Ltd. should make provision in the
books on the basis of estimation.
Q8: A Ltd. has sold its building for ₹ 50 lakhs to B Ltd. and has also given the possession to B Ltd. The
book value of the building is ₹ 30 lakhs. As on 31st March, 20X1, the documentation and legal
formalities are pending. The company has not recorded the sale and has shown the amount
received as advance. Do you agree with this treatment?
Ans: The economic reality and substance of the transaction is that the rights and beneficial interest in
the property has been transferred although legal title has not been transferred. A Ltd. should
record the sale and recognise the gain of ₹ 20 lakhs in its profit and loss account. The building
should be derecognized in the financial statements.
Q9: During the year 20X1-20X2, Raj Ltd. was sued by a competitor for ₹ 15 lakhs for infringement of
a trademark. Based on the advice of the company's legal counsel, Raj Ltd. provided for a sum of
₹ 10 lakhs in its financial statements for the year ended 31st March, 20X2. On 18th May, 20X2,
the Court decided in favour of the party alleging infringement of the trademark and ordered Raj
Ltd. to pay the aggrieved party a sum of ₹ 14 lakhs. The financial statements were prepared by
the company's management on 30th April, 20X2, and approved by the board on 30th May, 20X2.
Ans: As per AS 4 (Revised), adjustments to assets and liabilities are required for events occurring after
the balance sheet date that provide additional information materially affecting the
determination of the amounts relating to conditions existing at the balance sheet date.
In the given case, since Raj Ltd. was sued by a competitor for infringement of a trademark during
the year 20X1-X2 for which the provision was also made by it, the decision of the Court on 18th
May, 20X2, for payment of the penalty will constitute as an adjusting event because it is an event
occurred before approval of the financial statements. Therefore, Raj Ltd. should adjust the
provision upward by ₹ 4 lakhs to reflect the award decreed by the Court to be paid by them to
its competitor.
Had the judgment of the Court been delivered on 1st June, 20X2, it would be considered as an
event occurring after the approval of the financial statements which is not covered by AS 4
(Revised). In that case, no adjustment in the financial statements of 20X1-X2 would have been
required.

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QUESTIONS FROM OTHER SOURCE

Q10: The account of ABC Ltd., for the year ended 31st March, 2001, was approved by the BOD of the
Co. on 19th May 2001. The Director recommended a dividend @ 10%. However, the Directors
feel that this need not be disclosed in the accounts of the Co. for the year ended 31st March 2001
since it does not provide any additional information to the condition prevailing on the date
Balance Sheet i.e. on 31st March 2001. Do you agree with the BOD of ABC Ltd.?
Ans: As per para 8 of AS 4 "Contingencies and Events occurring after the Balance sheet Date”,
adjustments to assets and liabilities are required for events occurring after the balance sheet
date that provide additional information materially affecting the determination of the amounts
relating to conditions existing at the balance sheet date.
Accordingly, proposed dividend is not an adjusting event. If an enterprise declares dividends to
shareholders after the balance sheet date, the enterprise should not recognise those dividends
as a liability at the balance sheet date unless a statute requires otherwise. Such dividends should
be disclosed in notes.
Note: In the Schedule III of Companies Act 2013, this needs to be disclosed in the notes.
Q11: Advise B Co. Ltd. about the treatment of the following in the final statement of accounts for the
year ended 31st March, 1998. On 15th April, 1998, due to destruction of the factory by fire (fire
took place on 27th March. 1998) one of the company’s debtors, declared himself insolvent He
owed ₹ 1,17,000 to B Co. Ltd.
Ans: The debtor became insolvent on 15th April, 1998 i.e., after the balance sheet date, because of
destruction of his factory by fire. AS-4 require that assets and liabilities should be adjusted for
events occurring after the balance sheet date to provide additional evidence to assist the
estimation of amounts relating to conditions existing at the balance sheet date.
Accordingly adequate provision for bad debt should be created to cover the loss arising out of
such insolvency in the accounts for the year ended 31 March, 1998 since the fire took place
before the balance sheet date giving rise to conditions referred to in AS-4.
If fire occurs after the balance sheet date, then only the disclosure is necessary as regards the
recoverability of sundry debtors as para 15 of AS-4 (Revised)].
Q12: X Ltd. entered into an agreement to sell its immovable property included in the Balance Sheet at
₹ 10 lacs to another company for ₹ 15 lacs. The agreement to sell was concluded on 28th
February, 2006 and the sale deed was registered on 1st May, 2006. Comment with reference to
AS 4.
Ans: In this case the sale of immovable property was carried out before the closure of the books of
Accounts. This is clearly an event occurring after the balance sheet date. Agreement to sell was
affected before the balance sheet date and the registration was done after the balance sheet
date. So the adjustment for the sale of immovable property is necessary in the books of account
for the year ended 31st March, 2006.
Agreement to sale has taken place before approval of accounts and it is an adjusting event,
Hence, it is an adjusting event and the Company should record sale transaction in books as on 31

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March 2016. Registration of sales deed is mere formalities as per the principles of substance over
form.
Q13: X and Y entered into a proposal on 20.12.2005 which provided for the sale of an asset (book value
₹ 2,50,000) for ₹ 3,70,000 to Y. The sale deed was to be registered and other formalities
completed on 15.1.2006. Y has paid an advance money of ₹ 50,000 to X on 20.12.2005. Both X
and Y prepare final accounts on December 31 every year and present in April next. How the
transaction be shown in the books of X and for the year 2005.
Ans: Books of X: In the given case, proposal for deal of immovable property was sent before the
closure of the books of accounts. This is a non-adjusting event as only the proposal was sent and
no agreement was effected in the month of March i.e. before the balance sheet date. The amount
received as advance shall be shown as a liability in the balance sheet and there should be an
disclosure in Notes to Accounts about the proposal to sell.
Books of Y: He has paid an advance of ₹ 50,000 and it should be shown in the balance sheet.
There should be a disclosure in the Notes to Accounts for the year 2005, that proposal for
purchase of an asset at a price of ₹ 3,70,000 has been entered and an advance of ₹ 50,000 has
been paid.
Q14: Bottom Ltd. entered into a sale deed for its immovable property before the end of the year. But
registration was done with registrar subsequent to Balance Sheet date but before finalisation, is
it possible to recognise the sale and the gain at the Balance Sheet date? Give your view with
reasons.
Ans: Yes, both sales and gain of Bottom Ltd, should be recognized. In accordance with AS 9 at the
Balance Sheet date and what was pending was merely a formality to register the deed. It is clear
that significant risk and rewards of ownership had passed before the balance sheet date. Further
the registration post the balance sheet date confirms the condition of sale at the balance sheet
date as per AS 4.
Q15: Cashier of A-One Limited embezzled cash amounting to ₹ 6,00,000 during March, 2012. However
same comes to the notice of Company management during April, 2012 only. Financial statement
of the company is not yet approved by the Board of Directors of the company. With the help of
provisions of AS 4 “Contingencies and Events Occurring after the Balance Sheet Date” decide,
whether the embezzlement of cash should be adjusted in the books of accounts for the year
ending March, 2012?
What will be your reply, if embezzlement of cash comes to the notice of company management
only after approval of financial statements by the Boar Directors of the company?
Ans: As per AS 4, assets and liabilities should be adjusted for events occurring after the balance sheet
date that provide additional evidence to assist the estimation of amounts relating to conditions
existing at the balance sheet date.
Though the theft, by the cashier ₹ 6,00,000, was detected after the balance sheet date (before
approval of financial statements) but it is an additional information materially affecting the
determination of the cash amount relating to conditions existing at the balance sheet date.
Therefore, it is necessary to make the necessary adjustments in the financial statements of the
company for the year ended 31st March, 2012 for recognition of the loss amounting ₹ 6,00,000.

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If embezzlement of cash comes to the notice of company management only after approval of
financial statements by board of directors of the company, then the treatment will be done as
per the provisions of AS 5. This being extra-ordinary item should be disclosed in the statement of
profit and loss as a part of loss for the year ending March, 2013. The nature and the amount of
prior period items should be separately disclosed on the statement of profit and loss in a manner
that its impact on current profit or loss can be perceived.
Q16: There was a government notification in June 2001 increasing the limit of gratuity payment with
effect from 24th September 2000. The accounts were approved by the Board of Directors in July
2001. The accounts officer is of the opinion that since the change took place after the balance
sheet date, no effect should be given to it in the financial statements for the year ended 31"
March 2001. Is his view correct?
Ans: Event occurred – Government notification in June 2001 increasing the limit of gratuity payment
with effect from 24th September 2000
Timing of event – between balance sheet date and date of approval by the board. Hence, it’s an
event occurring after the balance sheet date
Condition existing – Services rendered by employee during the year for which condition existing
on balance sheet date to create provision for gratuity.
Therefore it is an adjusting event and hence a provision is required to be made considering the
increase in limit of gratuity payment.
Q17: A Ltd. was under audit for the year-ended 31.03.2004. An appeal filed by A Ltd. against the
demand of Excise Duty of ₹26 Crores was pending before the Supreme Court for which neither
provision was made nor was disclosed in the Notes to the Financial Statements. On 12th July
2004, the Auditor came to know through paper reports that the point involved in the appeal of
A Ltd. was adjudicated by the Supreme Court in the case of some other assessed, which is in
favour of the Department of Excise Duty. The Auditor insisted that provisions be made of ₹ 26
Crores in the Financial Statements. The Management was of the view that since its own case is
still pending, no provision is called for. It was also of the view that the event does not have any
effect on the financial position of the Company on the date of the Balance Sheet. Is the view of
the Management tenable?
Ans: Since the demand already existed on the Balance Sheet date (but was appealed against) and
subsequent events provide additional evidence thereto, AS-4 is applicable in this case.
As per AS 4, assets and liabilities should be adjusted for Events occurring after Balance date that
provide additional evidence to assist the estimation of amounts relating to conditions sting at
the Balance Sheet date
The Company should provide for the Excise Duty liability of ₹ 26 Crores for the year ending March
2004. The Management’s contention is not tenable.
Q18: A company follows April-March as its financial year. The company recognizes cheques dated 31
March or before, received from customers after balance sheet date but before approval of
financial statement by debiting Cheques in hand A/c and crediting the Debtors A/c. The Cheques
in hand is shown in balance sheet as an item of cash and cash equivalents. All Cheques in hand

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are presented to bank in the month of April and are also realised in the same month in normal
course after deposit in the bank. What is treatment under AS-4?
Ans: Even if the cheques bear the date 31 March or before, the cheques received after 31 March do
not represent any condition existing on 31 March. Thus the collection of cheques after balance
sheet date is not an adjusting event. Recognition of cheques in hand is therefore not consistent
with requirements of AS 4. Moreover, the collection of cheques after balance sheet date does
not represent any material change or commitments affecting financial position of the enterprise,
and so no disclosure of such collections in the Directors. Report is necessary.
It should also be noted that, the Framework for Preparation and Presentation of Financial
Statement defines assets as resources controlled by an enterprise as a result of past events from
which economic benefits are expected to flow to the enterprise. Since the company acquires
custody of the cheques after 31 March, it does not have any control over the cheques on 31
March and hence cheques in hand do not qualify to be recognized as asset on 31 March.
Q19: A Limited company closes its accounts on 31st March every year. It issued a cheque in favour of
one of its customers towards the refund of advance in December, 2004. In April 2005, the
customer returned the cheque to the company without presentation to the bank while accounts
of the company for that year were being finalized. Since the cheque was cancelled, the reversal
entry was passed in the books of account as on 31.3.2005 with a view to disclose the correct
balance as on that date, instead of showing the bank balance lower by treating the cheque as
“issued but not encashed as on 31.3.2005”. Whether the reversal entry passed in the books of
account of the company as on 31.3.2005 was proper since the cheque was cancelled before
closing of the accounts for the year.
Ans: Bank balance as on the date of balance sheet should not be adjusted by passing a reversal entry
since the event of cancellation of cheque after the balance sheet date did not relate to conditions
existing at the balance sheet date. However, if the amount of the cheque is material enough to
affect the financial position of the company, its disclosure should be made in the report of the
approving authority.
Q20: Neel Limited has its corporate office in Mumbai and sells its products to stockists all over India.
On 31st March, 2013, the company wants to recognize receipt of cheques bearing date 31st
March, 2013 or before, as "Cheques in Hand" by reducing "Trade Receivables". The "Cheques in
Hand" is shown in the Balance Sheet as an item of cash and cash equivalents. All cheques are
presented to the bank in the month of April 2013 and are also realized in the same month in
normal course after deposit in the bank. State with reasons, whether each of the following is an
adjusting event and how this fact is to be disclosed by the company, with reference to the
relevant accounting standard.
(i) Cheques collected by the marketing personnel of the company from the stockists on or
before 31st March, 2013.
(ii) Cheques sent by the stockists through courier on or before 31st March, 2013.
Ans:
(i) Cheques collected by the marketing personnel of the company is an adjusting event as the
marketing personnel are employees of the company and therefore, are representatives of

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the company. Handing over of cheques by the stockist to the marketing employees
discharges the liability of the stockist. Therefore, cheques collected by the marketing
personnel of the company on or before 31st March, 2013 require adjustment from the
stockists’ accounts i.e. from ‘Trade Receivables A/c’ even though these cheques (dated on
or before 31st March, 2013) are presented in the bank in the month of April, 2013 in the
normal course. Hence, collection of cheques by the marketing personnel is an adjusting
event as per AS 4 ‘Contingencies and Events Occurring after the Balance Sheet Date’. Such
‘cheques in hand’ will be shown in the Balance Sheet as ‘Cash and Cash equivalents’ with
a disclosure in the Notes to accounts about the accounting policy followed by the company
for such cheques.
(ii) Even if the cheques bear the date 31st March or before and are sent by the stockists
through courier on or before 31st March, 2013, it is presumed that the cheques will be
received after 31st March. Collection of cheques after 31st March, 2013 does not represent
any condition existing on the balance sheet date i.e. 31st March. Thus, the collection of
cheques after balance sheet date is not an adjusting event. Cheques that are received after
the balance sheet date should be accounted for in the period in which they are received
even though the same may be dated 31st March or before as per AS 4. Moreover, the
collection of cheques after balance sheet date does not represent any material change
affecting financial position of the enterprise, so no disclosure in the Director’s Report is
necessary.
Q21: A company deals in petroleum products. The sale price of petrol is fixed by the government. After
the Balance Sheet date, but before the finalisation of the company’s accounts, the government
unexpectedly increased the price retrospectively. Can the company account for additional
revenue at the close of the year? Discuss.
Ans: According to para 8 of AS 4 (Revised 1995), the unexpected increase in sale price of petrol by the
government after the balance sheet date cannot be regarded as an event occurring after the
Balance Sheet date, which requires an adjustment at the Balance Sheet date, since it does not
represent a condition present at the balance sheet date. The revenue should be recognized only
in the subsequent year with proper disclosures. The retrospective increase in the petrol price
should not be considered as a prior period item, as per AS 5, because there was no error in the
preparation of previous period’s financial statements.
Q22: The financial statement of Constructions Limited for the year ended 31st March, 2008 were
considered and approved by the board of directors on 20th May, 2008. The company was
engaged in construction work involving ₹10 crores. In the course of execution of work, a portion
of factory shed under construction came crashing down on 30th May, 2008. Fortunately, there
was no loss of life, but the company will have to rebuild the structure at an additional cost of ₹2
crores which cannot be recovered from the contractee. How should this event be reported?
Ans: Accounting Standard 4 defines ‘Events occurring after the Balance Sheet date’ as follows: ‘Events
occurring after the Balance sheet date are those significant events, both favourable and
unfavourable that occur between the Balance sheet date and the date on which the financial
statements are approved by the Board of Directors in the case of a Company”.
The facts of the case are as under:

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a) Financial Statements are prepared for the year ended 31st March, 2008.
b) Board of Directors of the Company approved the said financial statements on 20th May,
2008.
c) Construction crashed down resulted in a loss of ₹ 2 crores, on 30th May, 2008.
In view of the above definition, the said unfavourable event does not come under the definition
of ‘events occurring after the balance sheet date’.
Therefore, no adjustment to assets and liabilities need be required. And also it would not require
disclosure in the financial statements. Since it is a material change affecting the financial position
of the enterprise that took place due to the event occurring after the balance sheet date, the fact
and financial implications thereof need to be disclosed in the Directors’ Report.
Q23: You are an Accountant preparing accounts of A Ltd. as on 31.3.2003. After year-end in April, 2003,
A fire broke out in the premises damaging, uninsured stock worth ₹ 10 lakhs (Salvage value ₹ 2
lakhs) Describe, how above will be dealt with in the account of the company for the year ended
on 31.3.2003.
Ans: Having regard to the quantum of loss, the accountant has to consider whether it is material
enough to affect the very existence of the enterprise. In case loss of uninsured stock worth ₹ 10
lakhs affects the existence of A Ltd. then annual accounts would have to be prepared by not
following the fundamental accounting assumption of going concern despite the fact that the
event has occurred after the balance sheet date.
Alternatively, the disclosure stating nature of event and estimate of the financial effect or a
statement that such an estimate cannot be made will have been made in the report of Board of
Directors.
Q24: One of the manufacturing units of B Ltd. equal to 40% of the total assets was destroyed in a fire
for which there was no insurance cover. The chief accountant of the company contends that the
destruction of the unit took place only after the finalisation of the balance sheet and therefore
there was no need to make disclosure of loss in the annual accounts a at the Balance sheet.
Ans: Accounting Standard-4 on ‘Contingencies and Events Occurring After the Balance Sheet Date
deals with the treatment of contingencies and events occurring after the balance sheet date in
financial statements. Assets and liabilities should be adjusted for events occurring after the
balance sheet date that provide additional evidence to assist the estimation of amounts relating
to conditions existing at the balance sheet date or that indicate that the fundamental accounting
assumption of going concern (i.e., the continuance of existence or substratum of the enterprise)
is not appropriate. Therefore, having regard to the quantum of loss, the auditor has to consider
whether it is material enough to affect the very existence of the enterprise.
In case destruction of 40% of total assets for which no insurance cover is available affects the
existence of B Ltd. then annual accounts would have to be prepared by not following the
fundamental accounting assumption of going concern despite the fact that the event has
occurred after the balance sheet date.

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Alternatively, the disclosure stating nature of event and estimate of the financial effect or a
statement that such an estimate cannot be made will have to be made in the report of Board of
Directors.
Q25: A major fire has damaged the assets in a factory of a limited company on 2nd April - two days
after the year-end closure of account. The loss is estimated at ₹ 20 crores out of which ₹ 12 crores
will be recoverable from the insurers. Explain briefly how the loss should be treated in the final
accounts for the previous year.
Ans: Accounting Standard-4 on ‘Contingencies and Events Occurring After the Balance Sheet Date
deals with the treatment of contingencies and events occurring after the balance sheet date in
financial statements. Assets and liabilities should be adjusted for events occurring after the
balance sheet date that provide additional evidence to assist the estimation of amounts relating
to conditions existing at the balance sheet date or that indicate that the fundamental accounting
assumption of going concern (i.e., the continuance of existence or substratum of the enterprise)
is not appropriate. Therefore, having regard to the quantum of loss, the auditor has to consider
whether it is material enough to affect the very existence of the enterprise.
In case loss of ₹ 8 crores for which no insurance cover is available affects the existence of
enterprise then annual accounts would have to be prepared by not following the fundamental
accounting assumption of going concern despite the fact that the event has occurred after the
balance sheet date. Alternatively, the disclosure stating nature of event and estimate of the
financial effect or a statement that such an estimate cannot be made will have to be made in the
report of Board of Directors.
Q26: Pure Oil Ltd. closed the books of accounts on March 31, 2006 for which financial statement was
finalized by the Board of Directors on September 04, 2006. During the month of December 2005,
company under took the project of lying a pipeline across the country and during May 2006
engineers realized that due to unexpected heavy rain, the total cost of the project will be inflated
by ₹ 50 lakhs. How this should be provided for in the balance sheet of 2005-06 accordance to AS
4?
Ans: This event occurred after March 31, 2006 but before September 04, 2006 it is event occurring
after the balance sheet date. But this event is not affecting financial position on the date of
balance sheet therefore, no adjustment to assets and liabilities need be required. And also it
would not require disclosure in the financial statements. Since it is a material change affecting
the financial position of the enterprise that took place due to the event occurring after the
balance sheet date, the fact and financial implications thereof need to be disclosed in the
Directors’ Report.

QUESTIONS FROM RTP/MTP/EXAMS

Q27: Surya Limited follows the financial year from April to March. It has provided the following
information.
(i) A suit against the Company's Advertisement was filed by a party on 5th April, 2021,
claiming damages of ₹ 5 lakhs.

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(ii) Company sends a proposal to sell an immovable property for ₹ 45 lakhs in March 2021.
The book value of the property is ₹ 30 lakhs as on year end date. However, the Deed was
registered on 15th April, 2021.
(iii) The terms and conditions for acquisition of business of another company have been
decided by the end of March 2021, but the financial resources were arranged in April
2021. The amount invested was ₹ 50 lakhs.
(iv) Theft of cash amounting to ₹ 4 lakhs was done by the Cashier in the month of March 2021
but was detected on the next day after the Financial Statements have been approved by
the Directors.
Keeping in view the provisions of AS-4, you are required to state with reasons whether
the above events are to be treated as Contingencies, Adjusting Events or Non-Adjusting
Events occurring after Balance Sheet date. [Exam July 2021 (5 Marks)]

Ans:

(i) Suit filed against the company is a contingent liability but it was not existing as on date of
balance sheet date as the suit was filed on 5th April after the balance sheet date. As per
AS 4, 'Contingencies' is restricted to conditions or situations at the balance sheet date,
the financial effect of which is to be determined by future events which may or may not
occur. However, it may be disclosed with the nature of contingency, being a contingent
liability.

This event does not pertain to conditions on the balance sheet date. Hence, it will have
no effect on financial statements and will be a non-adjusting event.

(ii) In this case, no adjustment to assets and liabilities is required as the event does not affect
the determination and the condition of the amounts stated in the financial statements
for the year ended 31st March, 2021. There was just a proposal before 31st March, 2021
and hence sale cannot be shown in the financial statements for the year ended 31st
March, 2021.

Sale of immovable property is an event occurring after the balance sheet date and is a
non-adjusting event.

(iii) In the given case, terms and conditions for acquisition of business were finalized before
the balance sheet date and carried out before the closure of the books of accounts but
transaction for payment of financial resources was effected in April, 2021.

Hence, it is an adjusting event and necessary adjustment to assets and liabilities for
acquisition of business is necessary in the financial statements for the year ended 31st
March 2021.

(iv) Only those events which occur between the balance sheet date and the date on which
the financial statements are approved, may indicate the need for adjustments to assets
and liabilities as at the balance sheet date or may require disclosure.

In the given case, as the theft of cash was detected after approval of financial statements,
no adjustment is required. Hence it is non-adjusting event.

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 Chapter 10 : AS 4 – Contingencies & EOAB

Q28: As per the provision of AS 4, you are required to state with reason whether the following
transactions are adjusting event or non-adjusting event for the year ended 31.03.2021 in the
books of NEW Ltd. (accounts of the company were approved by board of directors on
10.07.2021):

(i) Equity Dividend for the year 2020-21 was declared at the rate of 7% on 15.05.2021.

(ii) On 05.03.2021, ₹ 53,000 cash was collected from a customer but not deposited by the
cashier. This fraud was detected on 22.06.2021.

(iii) One building got damaged due to occurrence of fire on 23.05.221. Loss was estimated to
be ₹ 81,00,000. [Exam Dec 2021 (5 Marks)]

Ans:

(i) If dividends are declared after the balance sheet date but before the financial statements
are approved, the dividends are not recognized as a liability at the balance sheet date
because no obligation exists at that time unless a statute requires otherwise. Such
dividends are disclosed in the notes. Thus, no liability for dividends needs to be recognized
in financial statements for financial year ended 31st March, 2021 and declaration of
dividend is non-adjusting event.

(ii) As per AS 4 ‘Contingencies and Events occurring after the Balance Sheet Date’ an event
occurring after the balance sheet date may require adjustment to the reported values of
assets, liabilities, expenses or incomes if such events relate to conditions existing at the
balance sheet date. In the given case, fraud of the accounting period is detected after the
balance sheet date but before approval of the financial statements, it is necessary to
recognize the loss. Thus loss amounting ₹ 53,000 should be adjusted in the accounts of
the company for the year ended 31st March, 2021 as it is adjusting event.

(iii) AS 4 states that adjustments to assets and liabilities are not appropriate for events
occurring after the balance sheet date, if such events do not relate to conditions existing
at the balance sheet date. The damage of one building due to fire did not exist on the
balance sheet date i.e. 31.3.2021. Therefore, loss occurred due to fire is not to be
recognized in the financial year 2020-2021 as it is non-adjusting event.

However, according to the standard, unusual changes affecting the existence or

substratum of the enterprise after the balance sheet date may indicate a need to consider
the use of fundamental accounting assumption of going concern in the preparation of the
financial statements. As per the information given in the question, the fire has caused
major destruction; therefore, fundamental accounting assumption of going concern
would have to be evaluated. Considering that the going concern assumption is still valid,
the fact of fire together with an estimated loss of ₹ 81 lakhs should be disclosed in the
report of the approving authority for financial year 2020 -21 to enable users of financial
statements to make proper evaluations and decisions.
Q29: A case is going on between ABC Ltd. and Tax department on claiming the exemption for certain
items, for the year 2019-2020. The court has issued the order on 15th April and rejected the claim
of the company. Accordingly, company is liable to pay the additional tax. The financial statements

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Chapter 10 : AS 4 – Contingencies & EOAB

were approved on 31st May, 2020. Shall company account for such tax in the year 2019-2020 or
shall it account for in the year 2020-2021? [RTP May 2021]
Ans: To decide whether, the event is adjusting or not adjusting two conditions need to be satisfied,
(a) There has to be evidence
(b) The event must have been related to period ending on reporting date.
Here both the conditions are satisfied. Court order is a conclusive evidence which has been
received before approval of the financial statements since the liability is related to earlier year.
The event will be considered as an adjusting event and accordingly the amount will be adjusted
in accounts of 2019-2020.
Q30: A fire, on 2nd April, 2020, completely destroyed a manufacturing plant of Omega Ltd. whose
financial year ended on 31st March, 2020, the financial statements were approved by their
approving authority on 15th June, 2020. It was expected that the loss of ₹ 10 million would be
fully covered by the insurance company. How will you disclose it in the financial statements of
Omega Ltd. for the year ended 31st March, 2020. [RTP Nov 2021]
Ans: The event is a non-adjusting event since it occurred after the year-end and does not relate to the
conditions existing at the year-end. However, it is necessary to consider the validity of the going
concern assumption having regard to the extent of insurance cover. Also, since it is said that the
loss would be fully recovered by the insurance company, the fact should be disclosed by way of
a note to the financial statements.
Q31: XYZ Ltd. operates its business into various segments. Its financial year ended on 31st March, 2020
and the financial statements were approved by their approving authority on 15th June, 2020.
The following material events took place:
a. A major property was sold (it was included in the balance sheet at ₹ 25,00,000) for which
contracts had been exchanged on 15th March, 2020. The sale was completed on 15th May,
2020 at a price of ₹ 26,50,000.
b. On 2nd April, 2020, a fire completely destroyed a manufacturing plant of the entity. It was
expected that the loss of ₹ 10 million would be fully covered by the insurance company.
c. A claim for damage amounting to ₹ 8 million for breach of patent had been received by the
entity prior to the year-end. It is the director's opinion, backed by legal advice that the claim
will ultimately prove to be baseless. But it is still estimated that it would involve a
considerable expenditure on legal fees.
You are required to state with reasons, how each of the above items should be dealt with in the
financial statements of XYZ Ltd. for the year ended 31st March, 2020. [RTP Nov 2021]
Ans: Treatment as per AS 4 ‘Contingencies and Events Occurring After the Balance Sheet Date’
(a) The sale of property should be treated as an adjusting event since contracts had been
exchanged prior to the year-end. The effect of the sale should be reflected in the financial
statements ended on 31.3.2020 and the profit on sale of property
₹ 1,50,000 would be considered.

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(b) The event is a non-adjusting event since it occurred after the year-end and does not
relate to the conditions existing at the year-end. However, it is necessary to consider the
validity of the going concern assumption having regard to the extent of insurance cover.
Also, since it is said that the loss would be fully recovered by the insurance company, the
fact should be disclosed by way of a note to the financial statements.
(c) On the basis of evidence provided, the claim against the company will not succeed. Thus,
₹ 8 million should not be provided in the account, but should be disclosed by means of a
contingent liability with full details of the facts. Provision should be made for legal fee
expected to be incurred to the extent that they are not expected to be recovered.

Q32: Tee Ltd. closes its books of accounts every year on 31st March. The financial statements for the
year ended 31st March 2020 are to be approved by the approving authority on 30th June 2020.
During the first quarter of 2020-2021, the following events / transactions has taken place. The
accountant of the company seeks your guidance for the following:
(i) Tee Ltd. has an inventory of 50 stitching machines costing at ₹ 5,500 per machine as on
31st March 2020. The company is expecting a heavy decline in the demand in next year.
The inventories are valued at cost or net realizable value, whichever is lower. During the
month of April 2020, due to fall in demand, the prices have gone down drastically. The
company has sold 5 machines during April, 2020 at a price of ₹ 4,000 per machine.
(ii) A fire has broken out in the company's godown on 15th April 2020. The company has
estimated a loss of ₹ 25 lakhs of which 75% is recoverable from the Insurance company.
(iii) A suit against the company's advertisement was filed by a party on 10th April, 2020 10
days after the year end claiming damages of ₹ 20 lakhs.
You are required to state with reasons, how the above transactions will be dealt with in the
financial statements for the year ended 31 March 2020. [RTP May 2022]
Ans: Events occurring after the balance sheet date are those significant events, both favourable and
unfavourable, that occur between the balance sheet date and the date on which the financial
statements are approved by the Board of Directors in the case of a company, and, by the
corresponding approving authority in the case of any other entity. Assets and liabilities should be
adjusted for events occurring after the balance sheet date that provide additional evidence to
assist the estimation of amounts relating to conditions existing at the balance sheet date or that
indicate that the fundamental accounting assumption of going concern is not appropriate. In the
given case, financial statements are approved by the approving authority on 30 June 2020. On
the basis of above principles, following will be the accounting treatment in the financial
statements for the year ended at 31 March 2020:
(i) Since on 31 March 2020, Tee Ltd. was expecting a heavy decline in the demand of the
stitching machine. Therefore, decline in the value during April, 2020 will be considered as
an adjusting event. Hence, Tee Ltd. needs to adjust the amounts recognized in its financial
statements w.r.t. net realizable value at the end of the reporting period. Accordingly,
inventory should be written down to ₹ 4,000 per machine. Total value of inventory in the
books will be 50 machines x ₹ 4,000 = ₹ 2,00,000.

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(ii) A fire took place after the balance sheet date i.e. during 2020-2021 financial year. Hence,
the financial statements for the year 2019-2020 should not be adjusted for loss occurred
due to fire. However, in this circumstance, the going concern assumption will be
evaluated. In case the going concern assumption is considered to be appropriate even
after the occurrence of fire, no disclosure of the same is required in the financial
statements.
(iii) The contingency is restricted to conditions existing at the balance sheet date. However,
in the given case, suit was filed against the company’s advertisement by a party on 10th
April for amount of ₹ 20 lakhs. Therefore, it does not fit into the definition of a
contingency and hence is a non-adjusting event.

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