Not a Going concern and Break Up Basis

burg

I have a client who ran a company selling expensive garden ornaments. This has proved a bad move and they have been trying to shift the stock for years.

I am preparing the 2010 accounts but they have since ceased to trade so are no longer a going concern. My research has found that I need to prepare accounts on the break-up basis.

My understanding is that I need to do the following:-

Reduce stock to its realised value
Reduce assets to realised value

Other than that the company has a large DLA c£60k which will not be repaid.

Is there anything else?

A search of the AAT forums has indicated that Jenni (Monsoon) had to do something similar.

Thanks all.

Monsoon

Ah so you've found my thread already.... that's all I know

Asd you have said, no accruals or prepayments, disclose the basis of preparation in the notes to the accounts (I haven't prepared the accounts yet so when I do I will let you know what I put).

That's about it I think.

burg

So in terms of no accruals what do you regarding accountancy fees???

Monsoon

burg wrote: »

So in terms of no accruals what do you regarding accountancy fees???

Good question, didn't come up on the one I was looking at
It's cash accounting not accruals accounting so I think you account for the fees as they are incurred. Presumably if you're drawing up accounts the company still exists, so if you bill them in May 2011, they will fall into the period that includes May 2011??

burg

Ok thanks for you help. I know just have to come up with some sensible wording for the note.

Thanks again

Monsoon

I will have a look for my notes - I spent ages looking and found it, can't remember whether it's here or on my laptop at home.

Monsoon

Ian,

Haven't refined it yet, but I found this on the internet. It will need to be modified slightly! And indicates the directors report also needs adjusting. It's a start, I think

"(I) Basis of Preparation
A summary of the principal accounting policies, all of which have been applied consistently throughout the year and the preceding year, are set out below.
The financial statements of XXX Ltd have been prepared under the historical cost convention. As explained in the Directors report , the Directors do not consider XXX to be a going concern, and have therefore prepared the financial statements on a break up basis. There has been no financial impairment of XXX's assets as a result of a break up basis of valuation. The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Companies Act 2006."

burg

Thanks Jenni

deanshepherd

You can still accrue for any post-cessation expenses in the accounts.

burg

Thanks Dean

Monsoon

Yep, thanks Dean!!