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ACCA Applied Skills · Financial Reporting · Provisions and events after the reporting period

Which statement about the going concern basis and events after the reporting period is correct under IAS 10?

If management decides after the reporting period to liquidate the entity or cease trading, the financial statements must not be prepared on a going concern basis. IAS 10 treats this as so pervasive that it overrides the position at the reporting date.

  1. AIf management decides after the reporting period to liquidate the entity, the financial statements may still be prepared on a going concern basis if the year-end position was sound
  2. BIf management determines after the reporting period that it intends to liquidate the entity, the financial statements should not be prepared on a going concern basisCorrect
  3. CA deterioration in operating results after the reporting period requires only disclosure and never affects the going concern basis
  4. DGoing concern is assessed solely at the reporting date and not afterwards

Explanation

IAS 10 states that if, after the reporting period, management determines it intends to liquidate or cease trading, or has no realistic alternative, the going concern basis is no longer appropriate. This applies even if the year-end position was sound. The other options contradict this.

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