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ACCA Strategic Professional · Strategic Business Reporting (International) · Other reporting issues

Gamma Ltd's interim report for six months to 30 June 20X5 is being prepared. In April a major customer, representing 40% of revenue, went into liquidation, and Gamma's lenders have indicated they may not renew a facility maturing in November. Management has a credible but unapproved plan to sell a property. Annual statements for 20X4 were prepared on a going concern basis with no uncertainty disclosed. Which is the most appropriate treatment in the interim report?

Gamma should remain on a going concern basis but disclose the customer liquidation, the facility risk and any material uncertainty. IAS 34 requires significant post-year-end events to be explained, and the break-up basis applies only where liquidation is intended or no realistic alternative exists.

  1. ANo disclosure is needed because IAS 34 requires only changes in accounting policies to be disclosed
  2. BPrepare on a break-up basis because the facility may not be renewed
  3. CPrepare on a going concern basis and disclose the events and any material uncertainty about going concern, as these are significant events affecting understanding of the interim periodCorrect
  4. DOmit the matter until the annual financial statements, where IAS 1 applies

Explanation

IAS 34 requires disclosure of events and transactions significant to understanding changes since the last annual report, and IAS 1 going concern assessment still applies. Break-up basis is only required if management intends to liquidate or has no realistic alternative, which is not the case. Material uncertainties must be disclosed rather than deferred to year-end.

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