Hero Ltd. reported a profit before tax of 8 lakhs for the third quarter ending 31st December 2024. On enquiry, you observe the following: (i)…

As per para 37 and para 39 of Ind AS 34 “Interim Financial Reporting", seasonal or occasional revenue and cost within a financial year should not be anticipated or deferred as of interim date if it would not be appropriate to anticipate or defer the same at the end of the entity's financial year. Therefore, dividend income, extraordinary gain, and gain on sale of investment received during 3rd quarter should be recognised in the 3rd quarter only. Similarly, sales promotion expenses incurred in the 3rd quarter should also be charged in the 3rd quarter only. Further, as per the standard, if there is change in the accounting policy within the current financial year, then such a change should be applied retrospectively by restating the financial statements of prior interim periods of the current financial year. The change in the method of inventory valuation is a change in the accounting policy. Therefore, the prior interim periods' financial statements should be restated by applying the change in the method of valuation retrospectively. Accordingly, the adjusted profit before tax for the 3rd quarter will be as follows: Statement showing Adjusted Profit Before Tax for the Third Quarter ending 31st December, 2024 (₹ in lakhs) Profit before tax (as reported) 8 Add: Dividend income (8-2) lakhs 6 Extraordinary gain (4-2) lakhs 2 Cumulative loss due to change in the method of inventory valuation should be applied retrospectively 10 Less: Sales promotion expenses (60% of 30 lakhs) (18) Gain on sale of investment (occasional gain should not be deferred) (10) Adjusted Profit before tax for the third quarter (2)