There was a theft of goods in the warehouse of ABC Pvt. Ltd. in the previous year 2022-23 amounting to ₹ 25 lakhs. At the time of physical verification of inventory, the same was detected in the current year 2023-24. How

As per Accounting Standard-5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies, the standard describes the treatment of changes in accounting estimates and disclosures to be made on account of such changes. The standard doesn't deal with tax implication on account of such changes as mentioned above. The theft is not expected to take place on a frequent or regular basis and is not in a normal course of business of ABC Pvt. Ltd. Thus, the same qualifies to be an extraordinary item. Also, the theft took place in the financial year 2022-23 but was discovered in 2023-24. This suggests that although the loss related to 2022-23, it was not shown and the profit was overstated by such amount i.e., ₹ 25 Lakhs. While taking the effect of such loss in the current year (2023-24), this is a prior period item. Thus, the disclosures for the same should be given in the financial statements that due to a theft in 2022-23, goods worth ₹ 25 Lakhs were lost and discovered only in the current year. The value of inventory should be adjusted for such loss (both opening and closing inventory).