Case: During the current year, Bhoomi Sugar Ltd signed a wage agreement with its workers' union revising wages with retrospective effect from two years ago, and paid arrears of ₹18,00,000. Under AS 5, the arrears are:

Correct answer: C) Not a prior period item; they are an expense of the current period, disclosed separately if material

Explanation

Prior period items arise from errors or omissions in preparing financial statements of earlier periods. AS 5 specifically notes that arrears payable to workers as a result of a retrospective wage revision are not prior period items, because the obligation arose only in the current period when the agreement was signed. The amount may be disclosed separately if its size or nature warrants it.