 Let us take up AS4 now, accounting standard 4, okay now contingencies and events occurring after balance sheet date contingencies actually they have given the name of accounting standard 4 but later on when they issued accounting standard 29 they covered contingencies in that chapter and they removed it from here. So tomorrow we will do AS29 and we will cover contingencies today we are here only covering events occurring after the balance sheet date, okay now why do you need events occurring after balance sheet date or a standard on that now see balance sheet is prepared up to 31st March balance sheet is signed somewhere later maybe 1 or 2 months later 3 months later so suppose we signed balance sheet in May, okay so there is a 2 month gap between the balance sheet date and the signing date, okay now there might be certain events which are material which might occur between the balance sheet date and the balance sheet signing date. Now these events the standard say that some of these events would be adjusting events means you go back and adjust your balance sheet some of these events would be non-adjusting events that means you just disclose it or it might not even require disclosures so it depends upon what type of event it is it is it just says that you take caution of making note of all the events that happen between these 2 dates and then you decide whether I should go and adjust the balance sheet or not or I should disclose the event or not. The point here is event is occurring between balance sheet date and signing date but it relates to something which has happened or something existing before the balance sheet date I will give you examples, okay event occurring after balance sheet date is significant events whether favorable or unfavorable both that occur between balance sheet date and the date on which financial statements are approved which is in the board meeting or when it is signed, okay 2 types of events can be identified one which provide further evidence of conditions which were existing at as on balance sheet date. The second one is which are indicative of conditions that arose subsequently I will repeat one event is which will confirm or which relates to a condition which is existing as on 31st March or before 31st March and the second event is which the conditions arose after 31st March. Now the conditions which arose after 31st March are normally considered as non-adjusting event maximum you might be required to disclose those events however conditions that existed before 31st March but were confirmed after 31st March or events occurred after 31st March those events are generally considered as adjusting events I will give you examples for each of them. Just a pictorial thing of what we discussed there is a start of reporting period which is 1st of April there end of reporting period which is 31st of March then there is a period during which or there is a date on which the financial statements are signed then the information is made public that means annual reports is published and then you have a AGM sort of these are the normal dates. Now we are only discussing or AS4 only covers 31st March to date of signing of the balance sheet it does not cover anything happens after that or anything happened before that it is only specifically covering 31st March to date of signing of balance sheet ok. As I said there are two types of events adjusting event non-adjusting event adjusting event requires appropriate adjustment in financial statements non-adjusting event just require disclosures through report of approving authority that means it might be in your director's report or it might be in your trustee report or some other report it just require disclosures it does not require any adjustments. Now when I say adjustments adjustments might be required anywhere whether assets liabilities expense income capital fund are required for events occurring after the balance sheet date that provide additional information materially affecting the determination of amounts relating to conditions existing on the balance sheet date so adjusting events on the only relate to those conditions that are existing as on 31st March so what are the requirements First is event should occur before the balance sheet date sorry between the balance sheet date and the approval date or signing date it should provide additional information regarding a condition that existed as on 31st March as I said let us take some examples a loss on trade receivable account that means you have a data standing in your balance sheet ok that data is bad becomes bad which is confirmed by insolvency so the customer becomes insolvent that insolvency occurs after the balance sheet date now what is the event is insolvency of customer that insolvency event occurred between the balance sheet date and the balance sheet signing date but the condition that means he was my data and the condition that means ok what is the condition in this case that existed as on balance sheet date sorry he was not officially insolvent but we doubted or we had a doubt that he would pay and we created a provision for doubtful dates ok that means only if we had created a provision for doubtful date and later on we came to know that he has become insolvent then and then only we should go back and adjust our accounts and we should make it a bad date and not provision for bad date if there was no provision for bad date for that customer then the condition was not existing as on balance sheet date and hence adjustment is not required if the amount of bad date is material then we can give it as a disclosure in the notes but we should not go back and adjust our accounts is it clear what is a condition existing as on balance sheet date I will write it down for you I have a data of 1000 rupees ok 31st March I feel that he will not be making me the payment or I have some doubts I have doubts about it so what I do is I create a provision for bad dates say suppose I create a provision for 60% this is my balance sheet as on 31st March ok my signing date is somewhere in May ok so sir I said 27th April I come to know that he has become insolvent or he has filed for insolvency now because he has filed for insolvency I know that I will not recover any money from him right now was there a condition existing as on balance sheet date I had doubts so that was a condition existing as on balance sheet date the condition got confirmed on 27th April when he filed for insolvency hence what I should do I should go back to 31st March and adjust it with 1000 rupees make it 0 and classify this as bad date and not provision for bad dates this is called event occurring after balance sheet date suppose suppose I did not have a provision for bad date here ok this was entirely 1000 rupees appearing in my balance sheet that means I had no doubts regarding recoverability of that amount if I had no doubts about recoverability of the amount and on 27th April I come to know that he has become insolvent this is not a adjusting event ok then I cannot go back and adjust my accounts is it then I have to one second one second let me complete then I have to first decide whether this 1000 rupees is material if 1000 rupees is material then I just have to disclose that the receivable of 1000 rupees has become bad in notes to accounts or directors report or somewhere I do not go back and adjust my accounts yes is it material that how many percent is provision I am making how many percentage provision I am making suppose 2% provision it is not material see 2% provision if you have made on the entire receivables ok that means you are not doubting a particular data it is just a normal policy of your institution to provide for the total receivables then it is not a adjusting event adjusting event is only when I have a condition that I am doubting that he will not pay the 2% to my back is up a create cut that you he's go for I create a excess provision of say 30% then only adjustment then only it is a adjusting event otherwise to call me that are insolvent do I have to go back and adjust that's not the case because 2% general policy a mess up pay cut right exceptional exceptional exceptional cases only another example a fraud during the accounting period fraud over April to March K beach me but I detected it after 31st March so suppose 27th April is the date when I come to know kiya last year me kuch fraud over now was there a condition existing as on balance sheet date yes fraud to pay the way fraud pay the way is a condition existing as on balance sheet date event kiya what event is detection of fraud event has occurred after balance sheet date but condition of fraud was happened before balance sheet date hence I have to go back and adjust my accounts for the fraud a good fraud over the first of April go and detection over 27th April go is there a condition existing as on balance sheet date no then I will not go and adjust my books these are what we have to make some adjustment you are you are not making a provision for audit remuneration yeah sometimes we will make we will make that okay so suppose how will auditor remuneration come in event occurring after balance sheet date suppose I made a provision of 30,000 rupees for auditor's remuneration okay on 27th April or some other date I realized that no it is not 30,000 actual approval was 35,000 or I have revised the auditor's remuneration to 35,000 suppose back they did so that is an event occurring after balance sheet date because condition was existing that means auditor's remuneration had to pay in the last year so I will go back and make it 35,000 how about in case of CAG remuneration sorry CAG CAG remuneration how we have to treat that because CAG remuneration okay what happens what are the event event occurring or event existing or condition existing on the balance sheet date for example what will happen first statutory there is finalized right statutory auditor finalized right and afterwards CAG's will come and they will the event will occurring that means that do you make a provision for CAG fees yeah sometimes so you just are required to make see that provisions will cover in AS 29 this is only events which are occurring after balance sheet date and for which I have to go and adjust see audit I know that audits will happen for every year so I have to anyways make provision for those audit fees whether it is normal audit or CAG audit or reporting date is first April to 31st March 31st March becomes reporting date see reporting date definition of the date on which you report that means you prepare the balance sheet that is 31st March signing date is date on which auditor sign so event occurring after balance sheet date is between the date of balance sheet and the date when the auditor sign or the balance sheet is signed balance sheet sign balance sheet sign what is the date when balance sheet is signed balance sheet date sign which is our institute we have to prepare it before 30th June 30th June so event occurring after balance sheet date is between 31st March and 30th June so for us that would be April May June is the period when you have to think about this standard no it is not about audit those CAG balance sheet sign will be signed on 30th June 30th June that will be considered as yes for you that will be considered as signing date so 30th June 1st April to 30th June is the event occurring after balance sheet date a small thing I want to clear suppose on April I came to know one data has become insolvent but data has become insolvent actually in May March March I have not made any provision in that case what you have to go and adjust adjust I will I will repeat this question he says that I have a data of 1000 rupees that data becomes insolvent in March but I come to know in April okay so event is I come to know that he has become insolvent in April condition is he had become insolvent on 31st of March so you go back and adjust make it a bad date okay so there is a case study which you have to answer a limited has agreed in principle to sell a plot of land on 18th March 2012 at a price determined by a independent value or pending the agreement for sale and due to non receipt of values report the sale of land could not be completed up to 31st March the company or the institute received a report on 7th of April 2012 and the agreement was signed on 10th of April 2012 the financial statements were approved on 12th of May 2012 is this a adjusting event yes the conditions were existing you had entered into an agreement you know that you have sold it you have sold a land before 31st March it was only that the price was not confirmed hence it is a condition existing as on balance sheet date you go back and make the transaction or record the transaction at the proper price so it is a event occurring after balance sheet date hence adjusting event and company should record the sale in the books as on 31st March okay any examples you have on adjusting event any questions you have whether this is a adjusting event or not okay non-adjusting event non-adjusting event is any event where adjustments are not appropriate because conditions were not existing on the balance sheet date it is only to be disclosed to approving authorities report like director's report example you have certain investments and the investments value go down after 31st of March now the investment value has gone down after 31st March hence it is a condition which was created after 31st of March so you do not go back and revalue your investments at the lower value the investments will still be valued as on 31st of March only you will not go back and adjust it ordinary fluctuations do not relate to condition existing at the balance sheet date and hence you do not adjust okay another example of non-adjusting event is an announcement after the balance sheet date but before approval of financial statements that you want to discontinue an operation now when you want to discontinue a part of operation say I will not conduct discourse I will not do this this happened after 31st March hence it is not a adjusting event non-adjusting event it you only have to disclose in a director's report or your trustee report or some report of approving authority you have to disclose nature of event and the estimate of financial effect of the event where estimate cannot be made the report should state that estimate cannot be made and it should give nature of the event okay now an earthquake destroyed a major warehouse or may be a building on 20th April 2012 last accounting year was 31st March accounts were approved on 8th May is this an adjusting event no condition did not exist on 31st March hence it is a non-adjusting event hence the construction of warehouse it is non-adjusting event okay X company limited theft of cash rupees 5 lakhs by cashier in January 2012 it was detected in May 2012 the accounts of company were not yet approved by the board of directors of the company whether the theft of cash has to be adjusted in the accounts of the company for 31st March yes condition was existing as on 31st March and she should go back and adjust it so again I will repeat event should occur between the balance sheet date and the date of approval adjusting event is a event when condition was existing as on balance sheet date then you have to go and adjust the accounts non-adjusting event if conditions are not existing on the balance sheet date you do not go back and adjust only disclose the requirements okay a few MCQs multiple choice questions event occurring after balance sheet date are events favorable or unfavorable which occur between which of the choices you have a doubt in the MCQ one second I will come to a doubt one second let us answer this MCQ then I'll come to a doubt it is second number because board meeting date is the date when you sign the balance sheet so it is between balance sheet and the date of board meeting okay yes sir it is very clear amount should be made after 31st March only amount should be released for the period of January to 31st March what is the treatment for the DA areas when do you come to know about the day but balance sheet balance sheet is not signed June 30th only and you come to know about the amount before 30th June no we don't know the DA percentage DA percentage we know you will know before 30th of June 30 of the June yes what is the treatment for that DA areas okay so the question is that the DA fall to March is paid in April or May or somewhere after 31st March the amount is also known after 31st March but it is known before the date of signing of balance sheet am I correct yes then you should go back and adjust your books no no create a liability is very clearly says order government order is clearly saying you should not be paid before 31st March it is about payment it is not about accrual I am not saying go back and pay before 31st of March I am saying create a liability before 31st of March okay what happens to bonus when do you come to know about the bonus in the middle of the financial year before signing of balance sheet or not after signing of the balance sheet okay do you make a provision for bonus yes that is on estimate basis yes now because you come to know about the final amount after signing you can't go back and adjust because balance sheet is signed suppose in a particular year if you come to know about the final amount before signing you go back and change the provision for bonus and make it a final amount clear okay which of the following are adjusting events as per accounting standard for which of the four one answer is one only if you created a provision before 31st March otherwise none of the above clear answer is one if you created a provision before 31st of March otherwise answer is none of the above so both the answers is correct with some conditions second and third is wrong second is what a decline in market value after balance sheet date you cannot go and adjust third is a fire in factory after balance sheet date hence it is not an adjusting event