You initially evaluate going-concern when deciding to accept a company as an audit client. In these cases, a total revaluation of assets and liabilities can provide information that closely approximates the … If the going concern assumption did not hold true, then it would not be possible to record prepaid or accrued expenses as such. The going concern concept or going concern assumption states that businesses should be treated as if they will continue to operate indefinitely or at least long enough to accomplish their objectives. In essence, that means that there is no threat of liquidation for the foreseeable future, which is usually perceived as a period of time lasting for 12 months. The going concern assumption applies in most business situations. Going Concern Assumption; Also known as ”continuity assumption”, the enterprise is normally viewed as a going concern, i.e., continuing in operation for the foreseeable future. Going concern assumption is the concept which the company expects to continue its operation within a specific time frame from the reporting date. Going Concern Assumption. The term going-concern means that your audit client will continue to operate indefinitely; a benchmark for indefinitely is at least 12 months past the balance […] Under US GAAP, financial statements are generally prepared under the assumption that a company will continue as a going concern for a reasonable period of time.This resource is intended to provide a high-level overview of management’s accounting requirements under US GAAP and a public company auditor’s requirements under PCAOB … A going concern, also known as a going concern assumption or going concern principle, is an accounting assumption stating that a business will stay in operation for the foreseeable future. Only where liquidation appears imminent is the assumption inapplicable. In other words, the going concern concept assumes that businesses will have a long life and not close or be sold in the immediate future. Going-Concern Value: The going-concern value of a company is a value that assumes the company will remain in business indefinitely and continue to be profitable. The going concern idea is not plainly characterized anywhere in generally accepted accounting principles, and so has a wide amount of interpretations in regards to when a company should report it. The company has enough resources to run the business, and it will not go bankrupt at any time soon. The Going Concern Assumption However, despite the above provisions of the standard, a number of preparers of financial statements are faced with serious application hurdles and hence the financial statements prepared therefrom fall short of the application and disclosure requirements as required by the standards. Given the varying and discrete effects of COVID-19 on different companies and industries, management may be required to assess several risk indicators and multiple scenarios to adequately assess the range of potential impacts on their liquidity, ability to continue as a going concern, and adequacy of disclosures. You reevaluate the client’s ability to continue as a going-concern as you wrap up the audit. Though this assumption is conceptually easy to articulate, it is often extremely difficult to determine when an entity’s continuing existence is in such doubt that management needs to disclose that possibility in a note to its financial statements, and its auditors need to modify their report to acknowledge that risk. The concept of going concern is relevant not only from an income statement Income Statement The Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time. The money measurement assumption underlines the fact that in accounting every worth-recording event, happening or transaction is recorded in terms of money. The Going Concern Assumption.
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