## Adjusting Events Under AS 4
### Definition
Adjusting Events are post-balance-sheet events that provide further evidence of conditions that existed on the balance sheet date.
Key test: Was there any indication/condition of this event before the year end?
- If YES → Adjusting Event
- If NO → Non-Adjusting Event
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### Treatment
> Adjusting events must be adjusted (reflected) in the financial statements of the previous year.
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### Visual Test
```
01-04-2024 14-02-2025 31-03-2025 15-05-2025 31-07-2025
| | | | |
Start Devang (debtor) Year End Devang goes BOD Approval
has case filed bankrupt/insolvent
(provision made ₹100)
Was there indication before year end? YES (case existed, provision made)
→ ADJUSTING EVENT → Adjust in FY 24-25 financials
```
---
### Standard Examples of Adjusting Events
| Event | Why Adjusting? |
|---|---|
| Theft/fraud that happened in previous year but detected in next year | Condition (theft) existed in previous year |
| Debtor against whom a legal case was filed before year end — declared insolvent after year end | Indication of default existed (case filed) |
| Sale/purchase of PPE done before year end but documentation completed after year end | Transaction occurred before year end |
| Value of inventory falls after year end — but conditions causing fall existed before year end | e.g., obsolescence signs existed at B/S date |
| Debtor wins a case after year end — but favourable conditions existed before year end | Favourable events are also adjusting if conditions existed |