Communiquez avec les autres et partagez vos connaissances professionnelles

Inscrivez-vous ou connectez-vous pour rejoindre votre communauté professionnelle.

Suivre

What does going concern issue mean? And why do we need to address this when doing the post-balance sheet testing?

user-image
Question ajoutée par Utilisateur supprimé
Date de publication: 2017/05/18
Motashim Husain Badshah
par Motashim Husain Badshah , Senior Manager , Verve Advisory Pvt Ltd

Hi Mary Grace.

Accounting`s most basic and important assumption is " Going Concern Concept". It assumes that business has a perpetual succession or continued existence.

There is one more accounting concept known as "Historical Cost Concept". According to which all the assets to be valued at its historical cost (Now there are some changes relating to reporting of assets in the FS under IFRS eg. IFRS - 16 - PPE where FA can be measured at Fair Value.) 

Now Please note:

1. If the entity is satisfying the basic assumption of " Going Concern Concept" then assets to be recorded at its Historical Cost in the FS or as per the IFRS relating to that particular asset.

2. If the assets is not satisfying the basic assumption of " Going Concern Concept" then all assets to be valued at its "Net Realizable value or Fair Value".   As the entity is no longer a Going Concern Entity and it will be liquidated soon. And for the liquidation purpose all the assets need to be presented at is Fair Value or NRV.

Hence under certain circumstances we need to check the Going Concern Assumption as per the SA 570 - Going Concern ( Standard on Auditing) on the FS date.

Thanks

 

Motashim Badshah

 

 

 

Soliman Abd  ALmalak Gendy
par Soliman Abd ALmalak Gendy , مدير ادارة مراقبة حسابات , الجهاز المركزى للمحاسبات

Going concern issue is the assumption that an entity will rem in business for the foreseeable future. _This means the entity will not be forced to hslt operatios and liquidate its asseets in the near tearm at wga may be very low fire-sale prices

More Questions Like This