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(61)-THE GOING CONCERN CONCEPT

Friday, December 25, 2009

The Going Concern Concept

The going concern concept implies that the business will continue in operational existence for the foreseeable future, and that there is no intention to put the company into liquidation or to make drastic cutbacks to the scale of operations.

Financial reporting standards 18 stats that the financial statements must be prepared under the going concern basis unless the entity is being or is going to be liquidated or if has ceased trading. The directors of a company must also disclose any significant doubts about the company’s future if and when they arise.

The main significant of the going concern is that the assets of the business should not be valued at their break up value, which is the amount that they would sell for if they were sold off piecemeal and the business were thus broken up.

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