ACCOUNTING STANDARD 4

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ACCOUNTING STANDARD 4

• CONTINGENCIES AND EVENTS OCCURING AFTER THE
  BALANCESHEET DATE

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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.

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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.

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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.

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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.

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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

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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.

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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

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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

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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.

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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.

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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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