Under breakup basis, which statement is consistent with the described approach?

Under breakup basis, which statement is consistent with the described approach?

• A. Under breakup basis, assets are valued using realisable values and non-current classifications are not used.
• B. It requires recognizing all assets at fair value.
• C. Liabilities are not included.
• D. It is the standard measurement basis for all financial reporting.

Answer: (A)

Breakup basis is used when a business is being dismantled or disposed of in parts rather than continued as a going concern. In this approach, assets are valued at their realisable value—the amount expected to be obtained from selling them, after considering costs to complete and sell. Because the focus is on recoverable amounts from breakup, there’s no need to maintain a separate non-current asset category; assets are presented at realizable values without ongoing-use classifications. Liabilities would still be taken into account in the liquidation process, so saying they’re not included would be incorrect. This basis is not the standard measurement basis for all financial reporting; it applies only in breakup scenarios.

Breakup basis is used when a business is being dismantled or disposed of in parts rather than continued as a going concern. In this approach, assets are valued at their realisable value—the amount expected to be obtained from selling them, after considering costs to complete and sell. Because the focus is on recoverable amounts from breakup, there’s no need to maintain a separate non-current asset category; assets are presented at realizable values without ongoing-use classifications. Liabilities would still be taken into account in the liquidation process, so saying they’re not included would be incorrect. This basis is not the standard measurement basis for all financial reporting; it applies only in breakup scenarios.