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AS 4: Contingencies and Events Occurring After the Balance Sheet Date

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 4: Contingencies and Events Occurring After the Balance Sheet Date: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

Events after the reporting date are evaluated to determine whether they provide additional evidence of conditions existing at the reporting date or indicate conditions arising later.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Customer insolvency after year end
02Settlement of litigation after the reporting date
03Fire, acquisition or restructuring after year end
04Finalisation of estimates using information received before approval

3. Practical application workflow

  1. Maintain an event log from reporting date to approval date.
  2. Identify whether the underlying condition existed at period end.
  3. Adjust recognised amounts for adjusting events.
  4. Disclose material non-adjusting events and estimated financial effect where practicable.
  5. Align legal, treasury, sales and operations inputs before accounts are approved.

4. Real-world application example

A customer enters insolvency shortly after year end. If financial difficulty existed at year end, the event confirms impairment and the receivable is adjusted. A major fire occurring only after year end is generally disclosed if material but does not change year-end asset values.

5. Journal-entry and accounting record pattern

Adjusting eventDr Impairment loss / Cr Allowance for doubtful debts
Non-adjusting eventNo year-end entry; provide material disclosure and estimate of effect where possible.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Post-close event questionnaire to business owners.
  • Legal-case status confirmation.
  • Credit-event review for major receivables.
  • Board-minute and subsequent-payment review.
  • Documented approval-date cut-off.

Common errors and red flags

  • Treating every post-year-end event as non-adjusting.
  • Adjusting for an event that arose entirely after year end.
  • Failing to disclose a material non-adjusting event.
  • Closing the event review before financial statements are approved.
  • Not connecting subsequent receipts to recoverability assessment.

7. Reviewer questions

  1. What condition existed at the reporting date?
  2. What new evidence became available later?
  3. Does the event require adjustment or disclosure?
  4. Is the financial effect reasonably estimable?
  5. Has the review covered the full approval period?

Related standards: AS 5, AS 9, AS 29

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

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Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.