ACCOUNTING STANDARD 4

CONTINGENCIES AND EVENTS OCCURING AFTER THE BALANCESHEET DATE

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 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.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sheet date but before approval of the financial statements, should be adjusted.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

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.

DISCLOSURE

If disclosure of events occurring after the balance sheet date in the report of the approving authority is required by paragraph 15 of this Statement, 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.

EXPLAINATION

Need for adjustments:Events occurring after the Balance

sheet date may indicate the need for adjustments to assets and liabilities as at the balance sheet date

EXPLAINATION

Need for Adjustments:All items materially affecting the

determination of the amounts relating to conditions existing at the balance sheet date.

If such events do not relate to conditions existing at the balance sheet date then adjustments to assets and liabilities are not appropriate.

EXPLAINATION

When such adjustments are not required:

Events occurring after the balance sheet date which do not affect the figures stated in the financial statements would not normally require disclosure in the financial statements

EXPLAINATION

When such disclosure may be required:There are events which, although they

take place after the balance sheet date, are sometimes reflected in the financial statements because of statutory requirements or because of their special nature. E.g. the amount of dividend proposed or declared by the enterprise after the balance sheet date

EXAMPLE 1

The sale price of edible oil and food grains was fixed by Government inclusive of Mandy fees during the financial year 1985-86, 1986-87 and 1987-88.

Later in October 1988 it came to notice of the Government that the Mandy fees not payable by the corporation on edible oil and food grains at the 2nd point of sale.

EXAMPLE 1

Thus the Mandy fees wrongly collected from the customer have to be refunded.

The corporation has shown the amount of Mandy fees collected has payable to the Government in the books of accounts during the year 1987-88 for the year as well as earlier years.

As the audit of the accounts for the year 1987-88 was not completed. As per ICAI the company should have provided for the relevant liability only in the 1991-92.

EXAMPLE 2

The wage proposal revision was approved by the Government of India 09.04.1990 effective from 1st April 1989. The company based its view on Para 50 of Accounting Standard IV did not make any provision for the liability on the basis that approval has come after the date of Balance sheet. As per ICAI the liability has arriving for wage revision and should have been accounting adjusted in the accounts of 1989-90.

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