Accounting Standard 4: Contingencies and Events Occurring after the Balance Sheet Date

A contingency is a condition or situation the ultimate outcome of which will be known or determined only on the occurrence or non-occurrence of uncertain future event/s. Events occurring after the balance sheet date are those significant events both favorable and unfavorable that occur between the balance sheet date and the date on which the financial statements are approved. Amount of a contingent loss should be provided for by a charge in P & L A/c if it is probable that future events will confirm that an asset has been impaired or a liability has been incurred as at the balance sheet date and a reasonable estimate of the amount of the loss can be made. Existence of contingent loss should be disclosed if above conditions are not met, unless the possibility of loss is remote. Contingent Gains if any, not to be recognized in the financial statements. Material change in the position due to subsequent events be accounted or disclosed. Proposed or declared dividend for the period should be adjusted. Material event occurring after balance sheet date affecting the going concern assumption and financial position be appropriately dealt with in the accounts. Contingencies or events occurring after the balance sheet date and the estimate of the financial effect of the same should be disclosed. Objective of this standard is to prescribe the accounting of contingencies and the events, which take place after the balance sheet date but before approval of balance sheet by Board of Directors. The Accounting Standard deals with Contingencies and Events occurring after the balance sheet date.