Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Events after the Reporting Period (Ind AS 10)

Vikram Textiles Ltd prepared its financial statements for the year ended 31 March 2027 on a going concern basis. On 25 April 2027, before approval of the financial statements, the Board resolved to cease trading and liquidate the company as it had no realistic alternative. What does Ind AS 10 require?

The financial statements must not be prepared on a going concern basis. When management decides after the reporting period to liquidate or cease trading, or has no realistic alternative, the effect is pervasive and requires a fundamental change in the basis of accounting rather than limited adjustments.

  1. AContinue the going concern basis and disclose the resolution as a non-adjusting event
  2. BAdjust only the carrying amount of inventories to net realisable value and continue as a going concern
  3. CPrepare the financial statements on a going concern basis but add a contingent liability for liquidation costs
  4. DDo not prepare the financial statements on a going concern basisCorrect

Explanation

Where management determines after the reporting period that it intends to liquidate or cease trading, or has no realistic alternative, the entity shall not prepare its financial statements on a going concern basis. The effect is pervasive, so it needs a change in the basis of accounting rather than a few adjustments. Merely disclosing the resolution while retaining going concern is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Events after the Reporting Period (Ind AS 10) shows your real accuracy, how long you take and where you lose marks.

Practise Events after the Reporting Period (Ind AS 10)Free diagnostic mock

More Events after the Reporting Period (Ind AS 10) questions