The Treatment for Breach of Going Concern Assumption as Suggested

question 34

Multiple Choice

The treatment for breach of going concern assumption as suggested by AASB 110 was not acceptable in the old AASB 1002 for reasons that include:

• A) The event is so significant in its effect on the economic decision making of general purpose financial statement users that it is vital that the financial statements be restated in the light of that information.
• B) The ethical dilemma for accountants and accounting regulators is that by requiring more disclosure from an entity that is already in financial difficulty, the accountants may actually hasten the demise of a business.
• C) It is not necessary to require the management of an entity to take action regarding its going concern status since it is the responsibility of the auditors to establish that going concern conditions exist.
• D) It is not appropriate to adjust the assets and liabilities recognised in the financial statements because under The Corporations Law and SAC 2 the financial statements must provide operating results for the reporting and the financial position as at the end of the reporting.

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Definitions:

Deflation

A decrease in the general price level of goods and services in an economy over time.

European Nations

Countries located in the continent of Europe, each with its own government, culture, and economy.

Booming Economy

An economic state characterized by rapid growth, increased spending, and low unemployment.

CPI

The Consumer Price Index represents a method for determining the average prices of a variety of consumer goods and services, such as healthcare, transportation, and food, by using their weighted average prices.