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Aaradhna Yadav (Querist)

24 February 2009 Sir,
I would like to ask you the following question - A Company dealing in pipeline had a contract with another company on 1-1-08. the company closed its accounts on 31-3-08. on 15th april it was found that pipeline could not be laid down because of a rocky surface lying under it. the explosive costing Rs.300000 is required to explode the rock to laid the pipeline. It is an event occuring after balance sheet date as per AS-4. I would like to know whether it is an adjusting event or non-adjusting event?

Please reply asap.

Simant Prakash

Simant Prakash (Expert)

25 February 2009 what needs to be analysed is that if any condition/contingency (about the contract not being tenable) existed on 31 March. For eg. during the sight survey etc. conducted before 31 March at the time of finalisation of contract.

If no such conditions existed, its clearly a non-adjusting event. You might as well need to analyse the Onerous contract clause for compliance to AS 29.

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