Going concern etc when ceased

Going concern etc when ceased

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When preparing the accounts of a company which has ceased trading after the balance sheet date but before the accounts approval what requirements are there regarding going concern basis etc?

Company had goodwill, fixed assets, debtors, work in progress, creditors etc etc at the balance sheet date but these have been sold to another company (the reason for the company ceasing) at approx the balance sheet values. Therefore no material differences exist.

Is it sufficient to record the cessation as a post balance sheet event and state that no material adjustments to the accounts / assets values were required.?

Thanks in advance.

Dan

Replies (4)

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By schilds2912
06th Oct 2008 11:39

Answer
Hi Dan

I am in the same situation now.

I have disclosed that the company has ceased trading after the year end and that the trade has been transferred to two other companies as a post balance sheet event. Do I need to do anything else i.e. going concern?

Also how did you tackle the letter of rep? Not sure on the wording?

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By User deleted
11th Jun 2008 14:40

Thanks Euan.
I did think it would be ok but, upon reading wording in the letter of representations as follows:

"I confirm that having considered my expectations and intentions for the next twelve months and the availability of working capital, the company is a going concern."

This caused me to revise the wording for the letter of representations and then got me thinking that perhaps I needed to revise the accounts.

I think I'll stick with disclosing that the company has ceased but this has no material effect on values in the accounts.

Thanks again.

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By qayyum
11th Jun 2008 14:59

Cessation of business

The appendix to SSAP 17 under the heading 'non adjusting events' recommends a disclosure where

"Closing a significant part of the trading activities if this was not anticipated at the year end."

Although in your case there was no significant impairment in values, I would say that the closure of TOTAL ACTIVITIES of a business must be a material event irrespective of the values.

On that basis your suggested note is both proper and esssential.

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Euan's picture
By Euan MacLennan
11th Jun 2008 14:07

What it is the problem?
If the company was a going concern at the accounting date, there is no need to alter any figures as a consequence of its subsequent cessation as that is not an adjusting post balance sheet event. Nor is there any need to amend the accounting policies to mention going concern.

I am not convinced that the non-adjusting post balance sheet event of ceasing to trade even needs to be disclosed as a note because, as you say, it is not material in terms of value. However, you can always disclose more than the minimum required, so Yes, your proposed note would be sufficient.

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