ACCA FR · Chapter 1 · Question 9 of 10
According to the Conceptual Framework, what is the underlying assumption on which financial statements are normally prepared?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Going concern
Explanation
The Conceptual Framework identifies going concern as the underlying assumption: the entity is assumed to continue operating for the foreseeable future. If management intends, or is forced, to liquidate or stop trading, a different basis is used and must be disclosed. Accruals and prudence are discussed elsewhere in the Framework but are not the underlying assumption.
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