Which treatment applies when a financial statement preparer concludes the entity is no longer a going concern and will cease trading?
Answer and explanation
Correct answer: C. Prepare on the break-up basis, with assets at expected realisable values
- Step 1: If the entity will cease trading, the going concern assumption is inappropriate.
- Step 2: The break-up basis measures assets at what they are expected to realise and provides for closure costs.
Answer
Prepare on the break-up basis, with assets at expected realisable values.
Why not the others: A note alone does not fix measurement that assumes continued trading. The cash basis is not a recognised alternative for a company's financial statements under IFRS. Historical cost less depreciation assumes the assets will be used, which is no longer true.
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