All 18 Going Concern questions
More in Going Concern
What is the going concern assumption? Whose responsibility is the going concern assessment? What is the difference between going concern doubt and actual insolvency? Why is going concern important to users of financial statements? What is a support letter (comfort letter) in a going concern context? What are indicators that going concern may be in doubt? How does the auditor evaluate management's going concern assessment? What time period does the going concern assessment cover? What are mitigating factors in a going concern assessment? What disclosures are required when there is significant going concern doubt?
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What basis of accounting is used if an entity is not a going concern?

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Answer

If management determines the entity will liquidate or cease trading (not a going concern), the statements are prepared on a different basis—commonly a break-up/liquidation basis—where assets are stated at net realizable (recoverable) values, liabilities may be reclassified, and this basis and its reason are disclosed. The auditor considers whether that basis and disclosure are appropriate.
Real-world example A company planning to wind up restates assets at expected sale values under a break-up basis, disclosed in the accounts.

Common follow-ups: How are assets valued on a break-up basis? | Must the change of basis be disclosed?

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All 18 Going Concern questions