Under breakup basis, what is the treatment of assets?

Under breakup basis, what is the treatment of assets?

• A. All assets valued at cost.
• B. Assets valued using fair value with reclassification.
• C. All assets are valued using realisable values and no 'non-current classifications' can be used.
• D. Non-current classifications are mandatory.

Answer: (C)

Breakup basis focuses on winding up the business, so assets are valued at realisable values—the net amount expected to be recovered from selling them, after disposal costs. Since the entity is not continuing, there’s no need to carry assets at cost or to measure them at fair value for ongoing use, and there’s no requirement to classify assets into current or non-current categories for a going concern. The result is that assets are valued using realisable values and no non-current classifications are used.

Breakup basis focuses on winding up the business, so assets are valued at realisable values—the net amount expected to be recovered from selling them, after disposal costs. Since the entity is not continuing, there’s no need to carry assets at cost or to measure them at fair value for ongoing use, and there’s no requirement to classify assets into current or non-current categories for a going concern. The result is that assets are valued using realisable values and no non-current classifications are used.