An entity should not prepare its financial statements on a going concern basis if
A) the entity does not fully comply with IFRS.
B) the bank has notified the entity that the entity has violated loan debt covenants.
C) a fire destroyed a significant production facility.
D) management determines after the reporting period either that it intends to liquidate the entity or to cease trading.

Question

Quizplus · Accepted Answer

The going concern basis assumes that an entity will continue its operations in the foreseeable future and does not intend to liquidate or to cease trading. If management decides to liquidate the entity or cease trading after the reporting period, this assumption is no longer valid, making it inappropriate to prepare financial statements on a going concern basis.

An Entity Should Not Prepare Its Financial Statements on a Going