Going concern: Difference between revisions
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The going concern basis of accounting requires that the accounts are prepared using the assumption that the business will continue in operation for the foreseeable future (more than 12 months) and that there is neither the aim nor need to liquidate or limit significantly the nature of the operations. | The going concern basis of accounting requires that the accounts are prepared using the assumption that the business will continue in operation for the foreseeable future (more than 12 months) and that there is neither the aim nor need to liquidate or limit significantly the nature of the operations. | ||
Revision as of 11:44, 10 September 2020
1.
A going concern is an entity which is commercially viable, able to pay its obligations as they fall due, and whose owners (or other controllers) intend it to continue in operation for the foreseeable future.
The going concern concept is important in bank prudential regulation and capital requirements.
To be fully effective as loss absorbing capacity, capital should absorb losses at the stage when the entity is still a going concern (and not yet a 'gone concern').
2. Accounting concepts.
The going concern basis of accounting requires that the accounts are prepared using the assumption that the business will continue in operation for the foreseeable future (more than 12 months) and that there is neither the aim nor need to liquidate or limit significantly the nature of the operations.
3.
More generally, a basis of valuing a business on the assumption that it will continue in operation.
Such a valuation may be made for accounting purposes or for other purposes.
4.
Pensions.
The assumption that a pension scheme continues without being discontinued.
Going concern valuations are made on such a basis.
