Between a company's year end and the day its accounts are approved, things happen. The accounting standards divide those things in two, and the division decides whether the numbers change or only the words do.
What are adjusting and non-adjusting events?
Adjusting events provide evidence of conditions that already existed at the reporting date. The accounts are changed. A customer that goes into insolvency in May, having been in difficulty in March, confirms that the March receivable was impaired at March: write it down. A court settlement in June that fixes the amount of a dispute outstanding at year end confirms the obligation existed: provide for it. The discovery of fraud or error that shows the accounts were wrong is always adjusting.
Non-adjusting events are conditions that arose after the reporting date. The accounts are not changed, but the event is disclosed with its nature and an estimate of its financial effect, or a statement that the effect cannot be estimated. An acquisition announced in May, a fire in June, a large fundraise in July, a currency move: all disclosed, none adjusted.
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How do the Indian and US rules differ?
Both standards, the Indian one and the US one, share this structure. Two differences matter operationally.
The evaluation window differs. The Indian and international standard runs to the date the financial statements are approved for issue by the board. The US standard distinguishes between statements that are issued and statements that are available to be issued, and SEC filers evaluate through the issuance date. In practice this is a difference of days, and it occasionally matters at the margin of a fast-moving situation.
The covenant-breach answer differs, and it differs hard. Under the international and Indian classification rules, a liability is current unless the entity has a right at the end of the reporting period to defer settlement for at least twelve months. A covenant tested at the year-end date and failed at that date destroys the right at that date. A waiver granted afterwards, however quickly, does not restore a right that did not exist on the reporting date, so the loan is classified current in the balance sheet you are reading. Under US practice, a waiver obtained before the financial statements are issued can support non-current classification where the conditions for it are met. (The international right-to-defer wording was tightened by amendments to the presentation standard effective for annual periods beginning on or after 1 January 2024, with the Indian standard amended to match; check the current text and the notification date on the standard-setter's own site before applying it to a specific year end. Checked September 2026.)
The arithmetic consequence on identical facts is large. A company with current assets of Rs 1,480.00 crore and current liabilities of Rs 890.00 crore has a current ratio of 1.6629 times and working capital of Rs 590.00 crore. Reclassify a Rs 620.00 crore term loan that breached its 31 March covenant test into current liabilities and the ratio falls to 0.9801 times and working capital goes to minus Rs 30.00 crore. The same facts under US practice, with a waiver in hand before issuance, leave the ratio at 1.6629 times. The two regimes differ by 0.6828 of a turn on the same company in the same week, and any cross-border comparison of current ratios that ignores this is comparing two different questions.
Why does a post-year-end acquisition matter?
The second case that matters is the post-year-end acquisition, and it matters because it is non-adjusting and therefore invisible in every ratio on the page. Take the manufacturer from the trigger list, whose reported leverage is 1.7996 times. In May it agrees to buy a business for Rs 1,150.00 crore, funded by debt, bringing Rs 205.00 crore of EBITDA, which is 5.6098 times. Pro forma net debt becomes Rs 2,802.00 crore against pro forma EBITDA of Rs 1,123.00 crore, so leverage is 2.4951 times. The reported balance sheet still says 1.7996. The subsequent-events note is the only place in the annual report where the deal appears, and it sits 0.0049 of a turn under the 2.50 times downgrade trigger from the rating rationale. Rs 5.50 crore more debt, or Rs 2.20 crore less EBITDA, which is 0.1959% of pro forma EBITDA or a 0.4783% overrun on the purchase price, and the trigger is breached. Management's guided synergies of Rs 38.00 crore would take pro forma leverage to 2.4134 times, which is the whole of the cushion, and synergies are not a fact.
Reading the subsequent-events note and the rating sensitivities on the same afternoon is what turns two boring paragraphs into a live monitoring item.