Query based on as 4 and as 10

AS 728 views 6 replies

Mohamed Rafi

CA FINAL

105 Points Joined February 2009

Dear Sir,

Revaluation of fixed asset as per AS 10 is generally carried out by a competent valuer. Say, the fixed asset to be revalued is land. The valuer, based on an estimate that an airport or a shopping mall is about to be erected near the said land, values the land at say Rs. 10 Lac for the FY 2012-13. After the balance sheet for the FY 2012-13 is prepared but before the signing off by the appropriate authority, the valuer comes to know that the plan to build the shopping mall on the adjacent land is dropped. As such, the value of the land will be Rs. 6 Lac only.

My question is whether this should be considered as adjusting events falling under events occuring after the balance sheet date as specified in AS 4? Or should this be simply notified in the director's report? In which year should this difference be accounted for?

Replies (6)

Ankita Agarwal

Articleship

59 Points Joined November 2012

No it is not an adjusting event under AS 4 , it can be notified in the director's report..

Sheena Maheshwari

ARTICLESHIP

240 Points Joined July 2011

was there any reason for the plan to be dropped , that occured before the year end date??

1) If yes then it is an adjusting event

2) if no then;

a) if it is material ( dependin on the nature and amount) disclosur is required

b) if not material nothing is to be done in the current year....to be recorded in the next year.

Mohamed Rafi

CA FINAL

105 Points Joined February 2009

Originally posted by : sheena
	was there any reason for the plan to be dropped , that occured before the year end date?? 1) If yes then it is an adjusting event 2) if no then; a) if it is material ( dependin on the nature and amount) disclosur is required b) if not material nothing is to be done in the current year....to be recorded in the next year.

Dear Sheena,

First of all, thanks for your response. Now say, if government approval was required for the project. After the Balance sheet date, government rejected the project. What would be the accounting treatment and in which year should it be adjusted?

CA Hareesh

1647 Points Joined August 2011

The situation mentioned by you is that, the valuer values the land as INR 10L based on the condition that the airport/ mall is going be erected nearby in near future. Therefore the condition of airport/ mall coming into place ACTUALLY EXISTS ON THE BALANCE SHEET DATE but subsequently ceased to exist since the plan was dropped. therfore it is an ADJUSTING EVENT..

Treatment :

1. the value of the asset should be adjusted.

2. suitable disclosure in financial statement should be made.

Pooja

Final CA

502 Points Joined May 2010

Adjusting event:

Adjustments to assets and liabilities are required for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date.

Since in the above case, the event of cancellation of construction of the Mall has occurred between the date of B/S & signing of Financials, it provides additional information supporting the event Already Existing on the B/S date, it is an adjusting event.

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Joined May 2010

Originally posted by : pooja k
	Adjusting event: Adjustments to assets and liabilities are required for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date. Since in the above case, the event of cancellation of construction of the Mall has occurred between the date of B/S & signing of Financials, it provides additional information supporting the event Already Existing on the B/S date, it is an adjusting event.