An accounting assumption that is used by preparers of financial statements in a situation where the use of the going concern assumption is not possible or practicable. In other words, an entity usually resorts to break-up basis for preparation of its financial statements when it is not expected to continue as a going concern. As a general rule, going concern basis applies under normal business conditions unless the entity’s management plans to cease its business or liquidate the entity.

In specific countries, the break-up basis indicates that an entity is being liquidated- its assets are being realized or are about to be realized as part of the liquidation process.