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Vinay sawant (nothing)     18 April 2021

Event occuring after balance sheet date

Suppose as on 31-03-2021 there is pending against the company a litigation in court regarding wage revision made 5 years ago by labour union. The company if lose the case will have to compensate employees with retrospective wage revision for last 5 years.
On 15-04-2021 company lost the case and no provision was yet made in accounts in respect of such payment as company was of the view that case will be in their favour.
Date of approval of accounts- 30-07-2021.

Applying AS 4
Should the company charge wage liability for the year 20-21 as current year exp. and for previous 4 years as prior period error as those does not pertain to the FY 20-21 ?

 5 Replies


Sourav (Student)     18 April 2021

It is a contingent liability is applied disclosure is required in financial statements by stating the statement showing

Litigation is in process against the company and the company is able to pay its debt.

Under AS 4 current year expenses should be shown and the previous year wages should be also required to be show as contingent liability
Ankit Neema

Ankit Neema   18 April 2021

In my View it should be shown as contingent Liability
Vinay sawant

Vinay sawant (nothing)     18 April 2021

My question is what is the treatment in FY 20-21 referring above case when the company lost case in court after B/S date but before it's approval by BOD...
Aman Khandelwal

Aman Khandelwal   18 April 2021

In FY 20-21 charge it to profit and loss account bcoz the liability which was contingent in nature materialized before approval. the outcome of court case confirmed that the quantum of liability which was pre-existing. this is something similar to spectrum case of Vodafone Idea. if amount is high then show as extra ordinary item
sabyasachi mukherjee

sabyasachi mukherjee   19 April 2021


what appears from your case,
it's very absurd there was no expenses showing as footnote as contingent liability in notes on accounts.
As a result of the fact that is a wrong perception.
Anyone who has signed the balance sheet is at stake.
The case existed before signing the contract and so the same should be shown as contingent liability.

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