Liquidation basis accounting is concerned with preparing the financial statements of a business in a different way if its liquidation is considered to be imminent.  Imminent refers to one of the following two conditions:

The accounting under the liquidation basis of accounting differs in several respects from normal accrual basis accounting. The key differences are:

In liquidation accounting, assets are measured at the estimated amount for which they can be sold – which may or may not be their fair market value. If the liquidation is rushed, this could mean that the estimated selling price is less than fair market value.

It is not permissible to anticipate a release from a liability that has not yet occurred. Instead, continue to recognize the liability until such time as an actual release has been confirmed.

Do not discount disposal costs to their present value. Also, there is no discounting of accrued income. There is no real point in doing so, since the business will presumably be liquidated so soon that the amount of any discount would be immaterial.

Under the liquidation basis of accounting, a business must issue two new statements, which are as follows:

Searching for Auditors or Liquidators in Dubai ?

Alya offers external audit and a range of other audit and assurances services,Liquidation Services,Forensic Audit and Accounting and Due Diligence Services etc  for a huge diversity of organisations. In Dubai, Alya specialises in audits for all kinds of businesses, international hotels, not-for-profits and financial services organisations. Our clients typically perform above industry benchmarks.

If you’d like to know more about how we could add value to your audit, please contact us.

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