Presentation on theme: "CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE"— Presentation transcript:
1CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE ACCOUNTING STANDARD 4CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
2TYPES OF “EVENTS OCCURRING AFTER THE BALANCE SHEET DATE.” ii) Events which are indicative of conditions that arose subsequent to the balance sheet date.i) Events which provide further evidence of conditions that existed at the balance sheet date.
3ADJUSTMENTS REQUIRED IN THE FINANCIAL STATEMENTS S noNature of events occurring after the date of B/SAdjustment1Event (i)-Accounts receivable as on the balance sheet date. Later some debtors become insolvent.Decrease AccountsReceivable. Show as bad debts2Event (ii)- decrement in the value of investments after the balance sheet due to changing market conditions.No adjustment- The conditions after the balance sheet date didn’t remain the same.3The events do not materially impact the financial statements.Disclosed only in the director’s report.4The events have a statutory requirement-e.g. proposed dividend.Adjustment will be made in the P/L account.5Events which affect the fundamental assumption of going concern of the enterprise- e.g. fire at the factory premises.It needs to be considered if it is proper to use the assumption in the preparation of financial statement.
4CONTINGENT LOSS VS CONTINGENT GAIN Contingent Loss should be provided for in the Profit and Loss Account, if:The event is probable.A reliable estimate can be made.Contingent gains should not be recognized in the financial statements
5The following should be disclosed in the DISCLOSUREThe following should be disclosed in thecase of director’s report as well as in case offootnote:The nature of the contingency.An estimate of the financial effect or the statement that a reliable estimate can’t be made.