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ACCOUNTING STANDARD 4

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ACCOUNTING STANDARD 4 CONTINGENCIES AND EVENTS OCCURING AFTER THE BALANCESHEET DATE EVENTS OCCURRING AFTER THE BALANCE SHEET DATE Assets and liabilities should be ... – PowerPoint PPT presentation

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Title: ACCOUNTING STANDARD 4


1
ACCOUNTING STANDARD 4
  • CONTINGENCIES AND EVENTS OCCURING AFTER THE
    BALANCESHEET DATE

2
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.

3
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.

4
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.

5
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.

6
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

7
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.

8
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

9
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

10
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.

11
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.

12
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.

13
  • THANK YOU
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