Going concern | Croner-i Tax and Accounting (2024)

FAQs

What is the going concern rule in accounting? ›

The going concern principle assumes that any organization will continue to operate its business for the foreseeable future. The principle purports that every decision in a company is taken with the objective in mind of running the business rather than that of liquidating it.

Examples of Going Concern

A state-owned company is in a tough financial situation and is struggling to pay its debt. The government gives the company a bailout and guarantees all payments to its creditors. The state-owned company is a going concern despite its poor financial position.

Craving more meaningful projects, creative problem solving and engaging work experience, many accountants leave the field to explore other career options where they can have a deeper sense of purpose and impact.

Going concern is an accounting term, which means a business is financially stable and can operate with the expectation of indefinite existence.

In assessing whether the going concern assumption is appropriate, management assesses all available information about the future, considering the possible outcomes of events and changes in conditions and the realistically possible responses that are available to such events and conditions.

Going concern is an important principle to determine how a company should reduce its expenses or sell its assets. It helps the company to defer some of the prepaid expenses until the future accounting periods. This will allow the company to efficiently utilize its assets.

If management conclude that the entity has no alternative but to liquidate or curtail materially the scale of its operations, the going concern basis cannot be used and the financial statements must be prepared on a different basis (such as the 'break-up' basis).

Fundamental accounting assumptions are the basic assumptions that accountants use in their work. They are made up of three key concepts: Concern, Consistency, and accrual basis. The fundamental accounting assumptions are the most basic assumptions made by accountants during their work.

This has caused anxiety for some, leading to existential questions regarding the future role of accountants. Will accountants become obsolete? The answer is, decisively, no—however, the nature of our role is undoubtedly changing.

Is CPA a stressful job? ›

Having reasonable expectations, getting exercise, and giving yourself rewards can all help. Being a CPA is a great job but can also be a stressful one sometimes. Young CPAs, in particular, juggle multiple tasks at different stages of completion, often for multiple bosses.

The employment of accountants in the U.S. is projected to grow by 6% from 2021 to 2031, which is about as fast as the average for all occupations. Around 136,400 accounting jobs are projected each year on average over the next decade.

US GAAP includes a two-step process that first determines whether substantial doubt about the company's ability to continue as a going concern is raised. If substantial doubt is raised, management then assesses whether that substantial doubt is alleviated by management's plans.

ISA 570 requires the auditor to consider going concern at the early stages of the audit, in particular when performing risk assessment procedures at the planning stage. At that point the auditor should consider whether there are events or conditions that may cast significant doubt about the going concern assumption.

Opinion – Emphasis of Matter Regarding Going Concern

An example of a going concern paragraph is as follows: The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

Going concern: The assumption that a business entity will be in operation for the foreseeable future. 2. Accrual basis: The assumption that the financial effects of transactions and events are recognized as they occur, and not when cash is received or paid.

A Going Concern is a business that functions on the expectation that an event of bankruptcy / liquidation does not have a significant likelihood in the near future. A Gone Concern is instead a business that is either already in such a liquidation state or is likely to enter in the near future.