Gunnamatta Ltd has a financial period ending on 30 June 2022 and is expected to complete its financial statements on 10 September 2022. On 24 August 2022 it loses a major customer that has become insolvent.

Also, owing to bad media publicity in August 2022 relating to the private life of its managing director, the demand for Gunnamatta Ltd’s products has plummeted. Both of these events have indicated that while the entity was a going concern as at 30 June 2022, this appears no longer to be the case.

REQUIRED

a. Would the reassessment of the entity’s going concern basis be an ‘adjusting event’ or a ‘non adjusting’ event?

b. How would the assessment that the entity is no longer a going concern impact on the preparation of the entity’s financial statements?

c. Do you agree with the treatment required under AASB 110, or the alternative treatment of its predecessor, AASB 1002, for events that occur after the reporting period that create a situation in which the entity is no longer a going concern? Explain your answer.