## Non-Adjusting Events Under AS 4

### Definition

Non-Adjusting Events are post-balance-sheet events for which no evidence or condition existed on the balance sheet date.

Key test: Was there any indication/condition of this event before the year end?

If NO → Non-Adjusting Event

---

### Treatment

> Non-adjusting events are NOT adjusted in the previous year's financial statements.

> However, if the event is material/significant, it must be disclosed in the report of the approving authority (Directors' Report).

---

### Visual Test

```

01-04-2024 31-03-2025 15-04-2025 31-07-2025

| | | |

Start Year End Fire breaks BOD Approval

out

Was there any indication of fire before year end? NO

→ NON-ADJUSTING EVENT

→ Do NOT adjust in FY 24-25

→ IF material → disclose in Directors'/Approving Authority's Report

```

---

### Standard Examples of Non-Adjusting Events

Event	Why Non-Adjusting?
Fire, earthquake, tsunami after year end	No prior indication; occurred entirely after B/S date
Market value of investment/inventory falls after year end — no prior condition	Decline arose after B/S date
Cheques received from customers after year end	Cash receipt is a post-year-end event

---

### Disclosure Rule

For a material non-adjusting event, disclose in the report of the approving authority:

Nature of the event
Estimate of financial effect (or a statement that such estimate cannot be made)

Worked example

### Example 1

Fire After Year End (Illustration 2 – Earthquake Variant):

An earthquake causing loss of ₹30 lakhs occurs after the balance sheet date. No conditions for such a loss existed at year end.

Answer:

1. This is a Non-Adjusting Event (no prior condition at B/S date).

2. Since the loss of ₹30 lakhs is material, it must be disclosed in the report of the approving authority.

3. Additionally, assess the Going Concern assumption: If the earthquake has caused major destruction such that the entity cannot continue operations, the financial statements of the previous year must be prepared on a liquidation/realisation basis instead of the accrual basis. If going concern is intact, no adjustment needed — only disclosure.

### Example 2

Shivam Debtor – After BOD Approval:

BOD approves on 31-07-2025.
On 15-08-2025, Shivam loses the case (condition existed before year end).

Question: Is this within the scope of AS 4?

Answer: NO. AS 4's window closes at BOD approval (31-07-2025). An event on 15-08-2025 is outside the scope of AS 4 entirely.

⚠️ Common exam mistakes

Adjusting non-adjusting events in the previous year — unless going concern is affected, never adjust the financials for non-adjusting events.
Omitting disclosure for material non-adjusting events — non-adjustment does not mean ignore; material events must be disclosed.
Disclosing non-adjusting events in 'Notes to Accounts' — the correct place is the 'Report of the Approving Authority' (Directors' Report), not Notes to Accounts (that treatment is only for dividends).

Bare-Act text Non-Adjusting Events – Treatment and Disclosure · AS 4 – Contingencies and Events Occurring After the Balance Sheet Date (ICAI) · click to expand

Events occurring after the balance sheet date which do not relate to conditions existing at the balance sheet date are non-adjusting events. Such events should not require adjustment in financial statements. However, disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise.

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AS 4 – Non-Adjusting Events

Worked example

⚠️ Common exam mistakes