IAS10

[mayank]

Facts of the case:
An entity has 31st March 2010 as its reporting date and its accounts are authorized by the Board of Directors on 31st July 2010. A debtor files for insolvency on 5th April 2010. Hence on the reporting date i.e. 31/3/2010 the condition of insolvency did not exist. On 10th July 2010 court declares the debtor as insolvent (which is not practicable) and awards dividend of 10paise for each rupee.
On the basis of above facts can we say that the event is a non-adjusting event as per IAS10?

[hariharm]

Hi Mayank,

Not quite :)

Although the debtor filed for insolvency 5 days after the reporting date, it is not correct to say that the condition of insolvency did not exist on the reporting date. The filing only confirms the existence of financial problems that must have been ongoing for some time. Therefore an adjustment has to be booked for the impairment of the receivable.

(On the other hand, a major loss of inventory due to a fire in a warehouse after the reporting date, would indeed be a non-adjusting event.)