Preparation of Statement of Affair

Statement of Affairs is a financial statement prepared by a company that is going through a winding-up process, either voluntarily or compulsorily. It is a report that provides an overview of the company’s assets and liabilities as at a specific date. The purpose of the statement of affairs is to assist the liquidator in assessing the financial position of the company and to determine the extent to which its creditors can be paid.

The statement of affairs is an important document that helps the liquidator to assess the value of the company’s assets and liabilities and to determine the order in which creditors will be paid. It is typically prepared by the company’s directors and submitted to the liquidator, who will use it as a basis for the distribution of assets to the company’s creditors. The statement of affairs must be prepared in accordance with applicable accounting standards and should provide an accurate and complete picture of the company’s financial position.

The statement of affairs includes the following information:

• Assets: A list of all the company’s assets, including property, investments, inventory, and other tangible and intangible assets.
• Liabilities: A list of all the company’s debts and liabilities, including loans, trade payables, taxes, and other obligations.
• Claims: A list of all the claims made by creditors against the company, including the amount owed and the priority of the claim.
• Shareholders’ equity: A statement of the company’s shareholders’ equity, including the amount of share capital, reserves, and retained earnings.

Preparation of Statement of Affairs

The preparation of a Statement of Affairs (SOA) involves several steps, which are as follows:

• Gather financial information: The first step in preparing an SOA is to gather financial information about the company, including details of all assets, liabilities, and creditors.
• Determine the date of the SOA: The date of the SOA is typically the date when the winding-up process began or the date when the company ceased trading.
• List all assets: The SOA must include a detailed list of all the company’s assets, including property, plant and equipment, investments, inventory, accounts receivable, and any other assets. The list should provide a description of each asset, its value, and any relevant notes.
• List all liabilities: The SOA must also include a detailed list of all the company’s liabilities, including loans, trade payables, taxes, and any other obligations. The list should provide a description of each liability, its value, and any relevant notes.
• Determine the value of assets and liabilities: The value of assets and liabilities should be determined at the date of the SOA. This may involve obtaining valuations for certain assets or assessing the likely recovery rates for outstanding debts.
• Determine the priority of claims: The SOA should also include a list of all claims made by creditors against the company. Claims should be listed in order of priority, with secured creditors being paid first, followed by unsecured creditors.
• Prepare the SOA: The SOA should be prepared in accordance with applicable accounting standards and should provide an accurate and complete picture of the company’s financial position. The SOA should include a summary of the company’s assets, liabilities, and claims, along with any relevant notes.
• Submit the SOA: The completed SOA should be submitted to the liquidator, who will use it as a basis for the distribution of assets to the company’s creditors.

Example of a Statement of Affairs (SOA)