Liquidation Basis

Question 1

Under liquidation basis of accounting, assets are presented at the amount if cash expected from the liquidation process.the assets’ values may not be fair value because the assets are being sold in the process of liquidation, which may deflate their value.

Liabilities are recognized and measured in accordance with US GAAP as required for liabilities. The entity cannot assume its liabilities will be forgiven.

Answer 1

.

Question 2

Disclosures required under liquidation basis of accounting:

Answer 2

1. Statement that fin statements are presented using the liquidation basis of accounting
2. Description of liquidation plan
3. Methods and significant assumptions used to measure assets and liabilities
4. Type and amount of costs and income accrued associated with the liquidation plan.

Question 3

Purpose of liquidation basis accounting?

Answer 3

The purpose of liquidation basis accounting is to inform financial statement users that liquidation is imminent.