- This topic has 15 replies, 9 voices, and was last updated 5 years ago by
.
- Posts
- Topics: 1
- Replies: 11
- ☆
IIRC break-up basis is based on net realizable value (eg. company undergoing liquidation will have to prepare its accounts on break up basis), and going concern basis is based on cost/fair value (as per IASs requirements)
break up is, literally, the basis you would use if the company were to be broken up ( and sold in pieces ). Going concern is the basis to be used when, literally, the company is a going concern – ie it is likely to last into the foreseeable future with neither the intention nor need to curtail significantly the scale of operations of the enterprise
- Topics: 0
- Replies: 2
- ☆
When a company is in the stage of winding up, and has prepared its FS on a break-up basis, should any amount receivable/payable from/to related party be waived, or shown on the statement of financial position?
Does this increase the audit risk?The audit risk would only arise if an inappropriate basis were used while preparing financial statements i.e if Co is not a going concern and the Financial statements are prepared on a going concern basis…. If appropriate disclosures are made and true state of the company’s affair is shown then there is no audit risk.
Correct me if I am wrong.- Topics: 1
- Replies: 11
- ☆
That’s depends the basis of preparing a financial statement on breakup basis.
IIRC, the assets are all classified as current assets, at the net reliasible value. (Including amount due from related parties)
non current liabilities are reclassified as current liabilities. (the assumption is that you are going to sell the assets to settle the amount in the foreseeable future).
I don’t think amount due to/from related parties can be waived just like that.
Going concern is a fundamental accounting concept that underpins the preparation and presentation of financial statements. The concept itself assumes that the entity will continue in operational existence into the foreseeable future (1 year) with neither the need nor intention significantly to curtail the scale of operations of the entity
OK?
- Topics: 22
- Replies: 26
- ☆
What is the treatment of NCA and NCL when a company is no longer a going concern and is preparing financial statements in break up basis?
Thanks in advance- Topics: 22
- Replies: 26
- ☆
How to measure the of NCA and NCL when a company is no longer a going concern?
Current assets will include all assets (i.e. PPE as well as current assets) – all will be measured at recoverable/realisable amount – if realised after the reporting date this will be readily ascertainable – if not yet realised it will be based on best available evidence (e.g. if there are negotiations to sell an asset).
Current liabilities will include all liabilities (i.e. long-term borrowings will become current) – the amount of many liabilities will be the same – but some could be more (e.g. if there are penalties) or less – e.g. if a lower amount has been negotiated.- Topics: 22
- Replies: 26
- ☆
Thank you so much!
I have another doubt, will the NCA be transferred as current assets at the reporting date if the company is preparing the financial statements as per break up basis?Absolutely – I have edited my previous post to clarify. You may also be interested in the link on this post https://opentuition.com/topic/break-up-basis-2/
- Topics: 22
- Replies: 26
- ☆
Thank you
- The topic ‘going concern and break up basis’ is closed to new replies.