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AS 4 to AS

Nidhiya Maria Thomas

AS 4 : Events occurring after
Balance Sheet Date
 Definition:
Events after reporting period are
those events, favourable and
unfavourable, that occur between the
balance sheet date and the date
when the financial statements are
authorized to issue.
 There are two kinds of events:

Adjusting Events

Non – Adjusting Events

Accounting Treatment:
 Adjusting events:
Adjusting events affect the amounts in the
financial statements so they must be adjusted.

 Non- Adjusting Events:

Non adjusting events do not concern the
position as at the reporting date so the
financial statements are not adjusted. If
material, nature and its financial effect must be
AS 5: Net Profit or loss for the Period,
Prior Period Items and Changes in
Accounting Policies

 Net profit or loss for the period:

Two broad categories of net P/L for the period
 P/L from ordinary activities.
 P/L from extraordinary activities.

 Accounting Treatment:
Should be disclosed separately in financial
statements as a separate head.
 Prior Period Items:
While preparing the financial statements, there
are certain items which actually correspond to
prior accounting periods. The income or losses
due to these items are a result of error or
omission in the financial statement of the prior

 Accounting Treatment:
The current period’s financial statements
should clearly show the effect of such prior period
 Changes In Accounting Estimates:
There are certain estimate which are used
while preparing the financial statements for any
period. At times these estimates are required to
be revised.

 Accounting Treatment:
Changes in the accounting estimates are
recognised in the financial statements in the
same period as the change.
 Changes in Accounting Policies:
A change in accounting policy should be undertaken
only in two cases:

 If the change is required by the law or the

accounting standard; or
 If the change helps in the better presentation of the
financial statements.

 Accounting Treatment:
Any change in the accounting policy which has a
material effect has to be disclosed. The impact of
such change should also be shown in financial
AS 7: Construction
 Definition:
A construction contract is a contract
which is entered in specifically for
construction of an asset or combination of
assets that are closely inter linked.

AS 7 describes the accounting treatment

in respect of the revenue and cost in
relation to a construction contract.
 Types of Contracts:

Fixed Price Contract – A contract in which

contractor agrees to a fixed contract price.
Cost-Plus Contract – A contract in which
contractor is reimbursed for cost incurred plus a
percentage of these cost of a fixed fee.

 Accounting Treatment:
When the outcome of a construction contract can be
estimated reliably, contract revenue and contract cost
should be recognised as revenue and expense by
reference to the stage of construction.
 When the outcome of a construction contract
cannot be estimated reliably,
 Revenue should be recognised only to the
extend of contact cost incurred of which
recovery is possible
 Contract cost should be recognised as an
expense in the period in which they are