Case: After the balance sheet date, the operating results and financial position of Lakshya Paper Mills Ltd deteriorate sharply and management concludes that it has no realistic alternative but to cease trading. Under AS 4, this development:

Correct answer: D) Requires a reconsideration of whether the going concern assumption is still appropriate for preparing the financial statements

Explanation

AS 4 states that events after the balance sheet date may indicate a need to adjust assets and liabilities where they indicate that the fundamental accounting assumption of going concern is no longer appropriate. If the going concern assumption is no longer appropriate, the effect is so pervasive that the basis of accounting itself needs to be reconsidered.