AS 4 Contingencies and Events Occurring After the Balance Sheet Date: A Practitioner Guide for FY 2026-27
AS 4 (Contingencies and Events Occurring After the Balance Sheet Date) is the Indian Accounting Standard that prescribes how companies must treat events arising between the balance sheet date and the approval of financial statements.
The Institute of Chartered Accountants of India (ICAI) issued AS 4 under notification by the Ministry of Corporate Affairs (MCA) through the Companies (Accounting Standards) Rules. The standard is effective from 1 April 1995 (revised as of 30 March 2016). It superseded the original AS 4 issued in November 1982.
For FY 2026-27, the most significant change remains the post-2016 amendment that prohibits recognising proposed dividends as a liability at year-end. This aligns Indian GAAP with Ind AS and IFRS on dividend timing.
AS 4 at a Glance
AS 4 requires companies to identify and account for significant events that occur after the balance sheet date but before financial statements are approved. The standard primarily serves statutory auditors, finance teams in non-Ind AS companies, and CA students preparing for exams.
| Field | Value |
|---|---|
| Standard Number | AS 4 |
| Full Name | Contingencies and Events Occurring After the Balance Sheet Date |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Accounting Standards) Rules, 2006 (reaffirmed in Companies (Accounting Standards) Rules, 2021) |
| Effective Date | 1 April 1995 (revised effective from 30 March 2016 per amendment); contingencies portion superseded by AS 29 from accounting periods commencing on or after 1 April 2004 |
| Supersedes | Original AS 4 issued November 1982 |
| Equivalent Standard | AS 4 ↔ Ind AS 10 ↔ IAS 10 |
| Applies To | All Level I, Level II, and Level III enterprises preparing financial statements under the Accounting Standards framework. Ind AS-applicable companies follow Ind AS 10 instead. The contingencies portion of AS 4 is superseded by AS 29 since 1 April 2004; only the events-after-balance-sheet-date portion of AS 4 remains operative. |
What is AS 4: Contingencies and Events Occurring After the Balance Sheet Date?
AS 4 sets out how an entity must deal with events, both positive and negative, that arise after its balance sheet date but before financial statements receive board approval. These can include legal settlements, frauds discovered post-year-end, or recommendations for dividends.
ICAI introduced this standard to ensure consistent treatment of such post-period events across Indian companies. The predecessor was issued in November 1982. Over time, ICAI aligned key aspects with international standards such as IAS 10 under IFRS to promote comparability.
Finance professionals, statutory auditors, CFOs in non-Ind AS companies, articleship trainees, regularly consult this standard when finalising annual accounts or drafting board notes.
Objective of AS 4
- Prescribe the accounting treatment for events occurring after the balance sheet date that affect the financial statements.
- Distinguish between events that require adjustment to financial statements and those requiring only disclosure.
- Specify the treatment of dividends recommended or declared by directors after the balance sheet date but before the financial statements are approved (significant amendment in 2016).
By providing clear rules on post-balance-sheet-date events, AS 4 supports a true and fair view as required by Section 129 of the Companies Act, 2013. This ensures users receive reliable information reflecting all relevant facts up to approval.
Who Must Apply AS 4?
Entities covered, applicability table
All Level I, Level II, and Level III enterprises preparing their financial statements under Indian GAAP must apply AS 4 unless they have transitioned to Ind AS. This includes listed companies not covered by Ind AS roadmap phases as well as unlisted public companies and private limited companies above prescribed thresholds.
| Entity Category | Applicability |
|---|---|
| Level I Enterprises | Mandatory |
| Level II Enterprises | Mandatory |
| Level III Enterprises* | Mandatory |
*Level III includes small private limited companies below turnover/net worth thresholds.
Ind AS-applicable entities follow Ind AS 10 instead.
Scope exclusions
- Contingencies, covered by AS 29 since 1 April 2004
- Going concern matters, guidance found across multiple standards
When the standard does not apply
Contingency accounting is governed by AS 29 Provisions, not this standard. For going concern doubts arising after year-end but before approval, refer also to disclosure requirements in AS 1 on accounting policies.
Key Definitions under AS 4
| Term | Definition |
|---|---|
| Events occurring after the balance sheet date | Events between balance sheet date and approval date by board/authority |
| Adjusting events | Events giving further evidence about conditions existing at balance sheet date |
| Non-adjusting events | Significant post-period events unrelated to year-end conditions; disclosed if material |
| Approval by approving authority | Date when board or relevant authority approves financials |
| Proposed dividend | Dividend recommended/declared after year-end but before approval; not recognised as liability since March 2016 |
Recognition and Measurement under AS 4
When to recognise
Under AS 4, an entity must assess every significant event occurring between its balance sheet date and formal approval of accounts. If an event provides additional evidence about conditions that existed at year-end (“adjusting event”), it requires adjustment in those financial statements. If an event reflects new conditions arising only after year-end (“non-adjusting event”), no adjustment is made but material items are disclosed.
For example:
Adjust if a court case pending at year-end settles with new information about liability.
Disclose if a major fire occurs post-year-end without prior indications at reporting date.
The cut-off for considering such events is always board approval or equivalent authority’s sign-off, not shareholder adoption or AGM ratification.
Initial measurement
When an adjusting event arises:
- Revise affected assets/liabilities using updated evidence.
- Recognise any resulting income/expense impact in profit or loss.
Common instances include:
- Settlement amounts determined for litigation existing at year-end.
- Discovery of frauds or errors relating to prior period transactions.
- Receipt of information confirming impairment already present at reporting date.
Formulaic principle:
Revised Amount = Original Carrying Amount ± Adjustment from New Evidence
If a non-adjusting event occurs:
- Do not alter figures in accounts.
- Disclose nature plus estimated effect if material; if estimation is impracticable state so explicitly.
Subsequent measurement
Subsequent measurement depends on classification:
- Adjusted balances remain until further evidence emerges in future periods.
- For non-adjusted disclosures, update only via narrative in notes if circumstances change materially before issuance.
Dividends recommended after balance sheet date are never recognised as liabilities post-March 2016 amendment; they are disclosed only until shareholder approval converts them into obligations for subsequent periods.
Post‑2016 Amendment, Proposed Dividend Treatment
Until March 2016, entities recognised proposed dividends recommended after year-end as liabilities at reporting date, a practice now prohibited. The Ministry of Corporate Affairs notified this change aligning Indian GAAP with Ind AS 10/IAS 10 globally:
No liability for proposed dividend exists at balance sheet date if recommendation occurs after period end; disclose amount/nature in notes instead.
This removes timing mismatches between Indian subsidiaries using local GAAP versus international parents applying IFRS/Ind AS, especially relevant for group consolidations.
The contingencies portion previously included within old versions of this standard has been fully replaced by requirements under AS 29 Provisions since April 2004.
Worked Examples on AS 4
Example 1: Adjusting event, fraud detected post-balance-sheet
Scenario:
Maharashtra Cement Ltd’s internal audit team uncovers in May 2026 that a senior employee misappropriated Rs 80 lakh through fictitious vendor invoices over FY 2025‑26. The fraudulent activity existed at year-end. Financials are approved on June 30th 2026.
Computation Table
| Item | Assessment | Impact |
|---|---|---|
| Fraud occurred | Yes, during reporting period | Adjust P&L |
| Evidence found | Post-balance-sheet but relates to prior period | Adjust account balances |
| Insurance recovery | Assess separately per virtual certainty under AS 29 | Recognise only if virtually certain |
Journal Entry:
Dr Loss by Fraud (P&L) Rs 80 lakh
Cr Other Receivables / Cash Rs 80 lakh
(Recognise recovery from insurance only when virtually certain.)
Example 2: Proposed dividend post‑2016 amendment treatment
Scenario:
Sundaram Engineering Pvt Ltd’s board recommends a final dividend of Rs 2 crore for FY 2025‑26 on May 25th 2026. Financial statements are approved June 28th 2026.
Computation Table
| Item | Assessment | Impact |
|---|---|---|
| Dividend declared | Yes, after balance sheet date | Non-adjusting event |
| Liability recognised | No, per amended Para 8.5 | Disclose only |
| Recognised upon approval | Yes, when shareholders approve at AGM | Recognise then |
Journal Entry:
No entry required at March 31st 2026.
Note disclosure: “The Board has recommended a final dividend of Rs 2 crore for FY 2025‑26 subject to shareholder approval. The same will be recognised on approval at AGM.”
Disclosure Requirements under AS 4
Disclosures under AS 4 ensure that users of financial statements receive transparent information about significant post-balance-sheet events, as mandated by Schedule III to the Companies Act, 2013. Proper disclosure distinguishes between events requiring adjustment and those demanding only narrative explanation, supporting auditor reporting under SA 700.
| Item | Requirement | Para Reference |
|---|---|---|
| Adjusting events impact | Disclose nature of adjustment if significant changes to estimates have been made | Para 16 |
| Non-adjusting events of material nature | Disclose nature of event and an estimate of financial effect, or a statement if not possible | Para 15 |
| Proposed dividend disclosure | Disclose dividends recommended after balance sheet date in the notes; not recognised as liability (post-2016 amendment) | Para 8.5 (added 2016) |
| Date of approval of financial statements | Disclose date of approval by the board | Implicit |
| Going concern matters arising after balance sheet date | Disclose if reasonable doubt arises about going concern; adjust if assumption no longer appropriate | Para 13 |
Auditors must verify that disclosures under AS 4 are complete and accurate before issuing their opinion under SA 700.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Recognising proposed dividend as liability at balance sheet date (this was permitted before 30 March 2016 but not afterwards)
- Treating clear adjusting events as non-adjusting (e.g., bankruptcy of major customer pre-existing at year-end)
- Failing to disclose financial effect of material non-adjusting events
- Confusing AS 4 contingencies with AS 29 provisions (AS 29 superseded AS 4 contingency portion)
- Adjusting financial statements for clearly post-period events (e.g., natural disasters, business decisions)
- Missing date of approval disclosure in financial statements
Industry application notes
The 30 March 2016 amendment was significant, most Indian companies had to change their accounting practice for proposed dividends. Pre-amendment financials cannot be compared directly to post-amendment financials without adjustment for this change.
Where an Indian subsidiary follows AS but its parent applies IFRS, dividend timing differences are now aligned post-2016 amendment. This removes a common GAAP reconciliation item for group reporting.
Smaller companies with simple operations rarely encounter complex adjusting events. Most disclosures relate to proposed dividends (now non-adjusting) and minor post-year-end developments such as new contracts.
AS 4 vs Ind AS 10 vs IFRS: Key Differences
The table below summarises how AS 4 compares with Ind AS 10 and IFRS (IAS 10) on key aspects for FY 2026-27:
| Aspect | AS | Ind AS | IFRS |
|---|---|---|---|
| Proposed dividend (post-2016 amendment) | Disclosed only; not recognised as liability | Disclosed only; not recognised as liability | Same |
| Contingencies | Superseded by AS 29 (since 1 April 2004) | Covered by Ind AS 37 separately | Covered by IAS 37 |
| Adjusting vs non-adjusting framework | Same | Same | Same |
| Date of authorisation | Date of approval by board | Date of authorisation for issue | Date of authorisation for issue |
| Disclosure depth | Limited | More detailed | Same as Ind AS |
India’s carve-outs from IFRS are minimal regarding post-balance-sheet event treatment since the removal of proposed dividend recognition in FY 2016-17. However, disclosure requirements remain less detailed under AS compared to Ind AS and IFRS.
Latest Amendments to AS 4 (FY 2026-27)
- Removal of proposed dividend recognition as liability, MCA Notification dated 30 March 2016, effective annual reporting periods commencing on or after 1 April 2016.
No further amendments have been notified to AS 4 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [Ind AS 10](/ind-as-10-events-after-the-reporting-period/), Equivalent standard for Ind AS-applicable companies; substantively aligned post-2016 amendment.
- [AS 29](/as-29-provisions-contingent-liabilities/), Provisions, contingent liabilities, and contingent assets, superseded the contingencies portion of AS 4.
- [AS 5](/as-5-net-profit-prior-period-changes/), Prior period items vs adjusting events of current period, interplay needs careful classification.
- [AS 1](/as-1-disclosure-of-accounting-policies/), Going concern assumption affects Adjusting/Non-adjusting analysis.
Need Help with AS 4 Compliance?
Patron Accounting LLP supports finance teams and statutory auditors in achieving full compliance with AS 4 Contingencies and Events Occurring After the Balance Sheet Date. Our team brings decades of experience across listed and unlisted Indian companies preparing accounts under the Accounting Standards framework.
Our services include:
- Statutory Audit
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Frequently Asked Questions (FAQs)
AS 4 applies to all Level I, II, and III enterprises preparing financial statements under Indian Accounting Standards. It covers events occurring between the balance sheet date and approval by the board. Ind AS-applicable companies follow Ind AS 10 instead.
Adjusting events provide additional evidence about conditions existing at the balance sheet date, these require adjustments in accounts. Non-adjusting events arise from new conditions after year-end; they do not affect figures but require disclosure if material.
Since March 2016, companies do not recognise proposed dividends recommended after year-end as liabilities at balance sheet date. Instead, they disclose such amounts in notes until shareholder approval at the AGM creates an obligation.
Both standards now align, neither recognises proposed dividends declared after year-end as liabilities at reporting date. Disclosure requirements are more detailed under Ind AS 10 compared to legacy Indian GAAP (AS).
No. The contingencies section was superseded by AS 29 Provisions from accounting periods starting on or after April 2004. Only post-balance-sheet event guidance remains operative within current AS 4.
The “date of approval” is when the board or other approving authority formally approves financial statements. Events up to this date must be assessed for potential adjustment or disclosure per standard requirements.
If reasonable doubt about going concern arises after year-end but before approval, management must disclose this fact. If continuation is no longer appropriate, accounts must be adjusted accordingly per Para 13 of AS 4.
Frequent errors include recognising proposed dividends as liabilities post-amendment, misclassifying adjusting versus non-adjusting events, failing to disclose material non-adjusting items, and omitting required approval dates in disclosures.
Large corporates often face complex adjusting-event scenarios such as litigation settlements or frauds discovered post-year-end. SMEs typically encounter fewer such cases, most disclosures relate to dividends or minor contractual developments after year-end.
Yes. Under legacy Indian GAAP (AS), it refers specifically to board approval date. Under Ind AS/IFRS frameworks, it means authorisation for issue, which may occur later depending on governance structure.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Accounting Standards) Rules, 2006 (reaffirmed in Companies (Accounting Standards) Rules, 2021)) · IFRS Foundation