Page 7 - 29. COMPILER QB - IND AS 10

Therefore, as per the provisions of Ind AS 2 and Ind AS 10, the consignment of inventories shall be recorded
in the Balance Sheet at a value of Rs. 8 lakhs calculated below:
Rs.’ Lakhs

Cost 8.00
Net realisable value 9.60
Inventories (lower of cost and net realisable value) 8.00

Q6 (March 22)

In the plant of PQR Ltd., there was a fire on 10th May, 20X1 in which the entire plant was damaged and the
loss of Rs. 40,00,000 is estimated. The claim with the insurance company has been filed and a recovery of Rs.
27,00,000 is expected.
The financial statements for the year ending 31st March, 20X1 were approved by the Board of Directors on

12th June, 20X1. Show how should it be disclosed?
SOLUTION

In the instant case, since fire took place after the end of the reporting period, it is a non -adjusting event.
However, according to Ind AS 10, disclosures regarding material non-adjusting event should be made in the
financial statements, i.e., the nature of the event and the expected financial effect of the same.
With regard to going concern basis followed for preparation of financial statements, the company needs to
determine whether it is appropriate to prepare the financial statements on going concern basis, if there is

only one plant which has been damaged due to fire. If the effect of deterioration in operating results and
financial position is so pervasive that management determines after the reporting period either that it
intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so,
preparation of financial statements for the financial year 20X0- 20X1 on going concern assumption may not
be appropriate. In that case, the financial statements may have to be prepared on a basis other than going

concern.
However, if the going concern assumption is considered to be appropriate even after t he fire, no adjustment is
required in the financial statements for the year ending 31 st March, 20X1.

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