## AS 4 Special Cases

### Case 1: Dividend Declared After the Balance Sheet Date

Nature: Non-Adjusting Event

Reason: On the balance sheet date, no liability to declare a dividend existed — the decision is made after year end by the BOD/shareholders.

Treatment: Unlike other non-adjusting events (which go in the Approving Authority's report), dividends declared after year end are disclosed in Notes to Accounts of the previous year's financial statements.

```

01-04-2024 31-03-2025 15-05-2025 31-07-2025

| | | |

Start Year End Dividend BOD Approval

Declared

→ Non-Adjusting Event

→ Disclose in Notes to Accounts of FY 24-25

(NOT in Directors' Report)

```

> Key distinction: Other material non-adjusting events → Approving Authority's Report. Dividends declared after year end → Notes to Accounts.

---

### Case 2: Going Concern Assumption Affected

Rule: If a post-balance-sheet event (including a non-adjusting event) affects the going concern assumption, it must be treated as an Adjusting Event.

The financial statements of the previous year must then be prepared on a Liquidation/Realisation Basis instead of the normal Accrual/Going Concern basis.

When does this apply?

When events after the year end make it clear that the entity cannot continue as a going concern.

```

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

| | | | |

Start B/S prepared Year End Fire (Non-Adj) BOD Approval

(Accrual Basis) Going Concern

AFFECTED

↓

Treat as ADJUSTING EVENT

Prepare FY 24-25 on

LIQUIDATION/REALISATION BASIS

```

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### Answer Presentation Framework (Exam Format)

For any AS 4 question in exams, structure your answer as:

1. Define AS 4 – Name: Events Occurring After the Balance Sheet Date + Definition

2. Classify – Identify whether the event is Adjusting or Non-Adjusting (give relevant definition)

3. Conclude – 2-3 lines applying the classification to the specific facts

4. If earthquake/major loss – additionally comment on Going Concern validity

Worked example

### Example 1

Dividend After Year End:

A company declares a dividend of ₹5 per share on 20-05-2025 (after 31-03-2025 year end). BOD approval is on 31-07-2025.

Answer:

This is a Non-Adjusting Event under AS 4 — no liability to pay dividend existed on 31-03-2025.
Since AS 4 mandates disclosure, and the specific treatment for post-year-end dividends is Notes to Accounts (not Directors' Report), disclose in Notes to Accounts of FY 24-25 financial statements.

### Example 2

Going Concern – Fire Example:

A major fire on 15-04-2025 (after 31-03-2025 year end) destroys 90% of the factory. The company cannot continue operations.

Answer (Illustration 2 format):

1. The fire is a Non-Adjusting Event (no prior condition).

2. However, since the fire has caused major destruction and the going concern assumption is no longer valid, AS 4 requires this to be treated as an Adjusting Event.

3. Financial statements of FY 24-25 must be restated on Liquidation/Realisation Basis.

4. If going concern were still valid despite the fire, no adjustment would be needed — only disclosure in the Approving Authority's report (since loss is material).

⚠️ Common exam mistakes

Disclosing post-year-end dividends in the Directors'/Approving Authority's Report — the correct disclosure is in Notes to Accounts.
Treating going concern-threatening events as non-adjusting simply because no prior condition existed — when going concern is affected, even a non-adjusting event must be treated as adjusting.
Preparing financials on accrual basis when going concern is doubtful — once going concern is invalidated, the basis must shift to liquidation/realisation.
Forgetting to evaluate going concern in earthquake/fire questions — examiners expect explicit comment on this even when the main classification is non-adjusting.

Bare-Act text Special Cases – Going Concern and Dividends Declared After Balance Sheet Date · AS 4 – Contingencies and Events Occurring After the Balance Sheet Date (ICAI) · click to expand

If an event occurring after the balance sheet date, which is otherwise a non-adjusting event, indicates that the fundamental accounting assumption of going concern is no longer appropriate, then the financial statements should be adjusted and prepared on a liquidation basis.

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AS 4 – Special Cases: Dividends and Going Concern

Worked example

⚠️ Common exam mistakes