SOCCURRING AFTER THE BALANCE SHEET DATE (AS PER AS-4) (IND AS-10) LOSURE isclosure of events occurring after the balance sheet date requires that the following information (a) The nature of the event; (4) An estimate of the financial effect, or a statement that such an estimate cannot be made. ‘A company follows April to March as its financial year. The company recognises cheques dated March or before, received from customers after Balance Sheet date, but before approval of financial ments by debiting “Cheques in Hand A/c’ and crediting “Debtors A/c’. The cheques in hand is wn in the Balance Sheet as an item of cash and cash equivalents. All cheques in hand are presented Ik in the month of April and are also realised in the same month in normal course after deposit in bank. State with reasons, whether the collection of cheques bearing date 31st March or before, but ived after Balance Sheet date is an adjusting event and how this fact is to be disclosed by the pany? [C.A. (IPCC) ~ May, 2010] Cheques received after Balance Sheet date bearing the date of 31st March or before is not an djusting event because collection of cheques after Balance Sheet date, does not represent any condition sting on the Balance Sheet date. Moreover, the Collection of cheques after Balance Sheet date does not represent any material thange affecting the financial position of the enterprise. Hence, no disclosure for such collections in| Directors’ Report is necessary. USTRATION 2. f ‘A company entered into an agreement to sell its immovable property to another company for %3: . The property was shown in the Balance Sheet at 27 lakhs, The agreement to sell! Was conclude fon 15th February, 2009 and sale deed was registered on 30th April, 2009. The finanei ents fo} ithe year 2008-09 were approved by the Board on 12th May, 2009. ue You are required to state, how this transaction would be dealt with in the financial statements f the year ended 31st March, 2009. [C.A. (IPCQ)— November, 200!§ existing at the Balance Sheet date. The agre before the Balance Sheet date. However, the l, 2009 and this provides additional evidence relatin; et date, Hence, the assets should be adjusted and €28 la ised in the financial statements for the year 2008-09. i ° il, 2012 only. Fina i Notice of the company’s management during April, ‘are not yet approved by the Board of Directors of the company. With the -4 “Contingencies and Events Occurring after the Balance Sheet Date’ “The loss due to embezzlement by the cashier is an adjusting event because at the Balance Sheet date embezzlement was existing though it was detected after Balance Sheet date but before approval of ial statements by the Board of Directors. Hence, it is necessary to recognise the loss amour 5£6,00,000 and adjust the financial statements of the company for the year 2011-12. ILLUSTRATION 4. An earthquake destroyed a major warehouse of Daya Ltd. on 18th May, 2011. The accounting year the company ended on 31st March, 2011. The accounts were approved on 30th June, 2011. The loss n earthquake is estimated at 45 lakhs. State with reasons, whether the loss due to earthquake is an ig or non-adjusting event and how the fact of loss is to be disclosed by the company? [C.A. (IPCC) — May, 2012] loss due to earthquake is not an adjusting event because at the Balance Sheet date d not exist, loss of 745 lakhs due to earthquake need not be reco, earthquake loss is significant, it should be me gnised in the financial statements of Of financial statements to make proper eval ntioned in the Directors’ Report of uations and decisions. final accounts for the year ended 31st March, , 2022 a company made a provision bles. In the last week of Febru: , a , 2022 ivable heavy loss due to an earthquake; the loss was ni a yon he trade receivable became a eee 'ot covered by any insura 2 Yankrupt. Can the company provide for the full | Y Of the trade receivable in the final accounts for the ae ended 31st March45 4) (IND AS-10) __----- ENTS OCCURRING AFTER THE BALANCE (AS PER AS-4) (NI : aa 4 : 1 evidence to conditions existing at the This is an adjusting event because it provides additional lance sheet date. : Hence, full provision for bad debt amounting to 2 lakhs should be made to cover the to the insolvency in the Final Accounts for the year ended 31st March, 2022. loss arising USTRATION 6. During the year 2021-22, Raj Ltd. was sued by a competitor for demark. Based on the advice of the company’s legal counsel, Raj n its financial statements for the year ended 31st March, 2022. On 18th May, 2022, the oe Boided in favour of the party alleging infringement of the trademark and ordered Raj Ltd. to pay the jeved party a sum of £14 lakhs, The financial statements were approved by the board on 30th May, 215 lakhs for infringement of @ Ltd, provided for a sum of =10 OLUTION: This is an adjusting event because it provides additional evidence materially affecting the mination 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 ‘Year 2021-22 for which the provision was also made by it, the decision of the Court on 18th May, 22, for payment of the penalty will constitute as an adjusting event because it is an event occurred fore approval of the financial statements. Therefore, Raj Ltd. should adjust the provision upward by Jakhs to reflect the award decreed by the Court to be paid by them to its competitor. Had the judgement of the Court been delivered on Ist June, 2022, it would be considered as an event wurring after the approval of the financial statements which is not covered by AS-4 (Revised). In ‘that se, no adjustment in the financial statements of 2021-22 would have been required. USTRATION 7. A company has filed a legal suit against the debtor from whom 740 lakh is recoverable as on 1.3.2022. The chances of recovery by way of legal suit are not good as per legal opinion given by the el in April, 2022. Can the company provide for full amount of 40 lakhs as provision for doubtful ebts? Discuss, is an adjusting event, In the given case, company should make the provision for doubtful debts, egal suit has been filed on 31st March, 2022 and the chances of recovery from the suit are not good. ugh, the actual result of legal suit will be known in future yet situation of non-recovery from or exists before finalisation of financial statements. Therefore, provision for doubtful debts shoul made for the year ended on 31st March, 2022. USTRATION 8. Ages In preparing the financial statements of R Ltd. for the year ended 31st Mareh, 2022, you come Oss the following information. State with reasons, how you would deal with t 1¢ financial jents : ea eee wer .ES ae AFTER THE BALANCE SHEET DATE (AS PER AS-4) (INI 46 EVENTS OCCURRING Wethston F 1 £100 lakhs in April, 2022 before approval of Financial Si Boa Saran i ne acquisition of another company doing similar business, the negot oard of Directors in the ac which had started during the year. ers Hohiston of another company is an event occurring after the balance sheet date, Hi wi Jo assets and liabilities is required as the event does not affect the determinati acioiine of the amounts stated in the financial statements for the year ended 31st Applying AS-4 (Revised) which clearly states that disclosure should be made in the approving authority of those events occurring after the balance sheet date that represent n changes and commitments affecting the financial position of the enterprise, the investment 6 lakhs in April, 2022 in the acquisition of another company should be disclosed in the report Approving Authority to enable users of financial statements to make proper evaluations and deci ILLUSTRATION 9. A Limited Company closed its accounting year on 30.6.2022 and the accounts for that period considered and approved by the Board of Directors on 20th August, 2022. The company was e1 in laying pipeline for an oil company deep beneath the earth. While doing the boring work on 1.9. ithad met a rocky surface for which it was estimated that there would be an extra cost to the tune of & lakhs, You are required to state with reasons, how the event would be dealt with in the finar statements for the year ended 30.6.2022. SOLUTION j As per AS-4 ‘Events Occurring after the Balance Sheet Date’ are the events which oceur the balance sheet date and the date on which financial statements are approved by the Board) in the case of a company, i —_—_— eee THEORETICAL QUESTIONS What are the events occurring after the Balance Sheet date? Give suitable examples.