Definition[ edit ] The going concern assumption is universally understood and accepted by accounting professionals; however, it has never been formally incorporated into U.
In other words, we are not supposed to expect companies not to fail. Companies supposed to be treated like they will stay out of bankruptcy and remain in business. This is an important concept to financial accounting because many other accounting principles are based on the assumption that companies will not cease to exist at the end of a period.
The going concern principle is what establishes the ability for companies to accrue expenses and prepay asset.
If we automatically assumed that companies ended operations at the end of every period, there would be no reason to accrue expenses. Example The going concern assumption reinforces the matching principle, which states that revenues and expenses need to be accounted for in the period at which they are earned or incurred.
Companies must also inform investors and creditors about possible going concern issues. For instance, if a company is facing financial difficulties from an excessive debt burden or is facing a large liability lawsuit that could bankrupt the company, management must mention these cautions in the financial statement notes.
· a going concern A business, enterprise, or activity that has done well thus far and is expected to continue making a profit.
The odds weren't great setting up another café in town, but it has since become a going timberdesignmag.com://timberdesignmag.com+going+concern. · For example, going concern value would take into account scenarios in which a long-tail casualty insurer would be downgraded to a rating that undermined client confidence in its ability to pay claims in the distant timberdesignmag.com://timberdesignmag.com+Concern+Value.
· From our sister site, Going Concern: [A] judge in Seattle has allowed a revised lawsuit to proceed that lists “Washington Mutual officers and directors, underwriters, and the auditing firm timberdesignmag.com · For auditors, ISA , Going Concern is a well-established source of guidance, and additional direction has been provided by the IAASB's Practice Alert Audit Considerations in Respect of Going Concern in the Current Economic Environment, issued in January timberdesignmag.com /technical-articles/timberdesignmag.com If a company is a going concern, it is actually doing business, rather than having stopped trading or not yet having started trading.
[ business ] The receivers will always prefer to sell a business as a going timberdesignmag.com://timberdesignmag.com Update No. —Presentation of Financial Statements—Going Concern (Subtopic ): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern By clicking on the ACCEPT button, you confirm that you have read and understand the FASB Website Terms and timberdesignmag.com?cid=&d=&pagename.