Going concern
A firm is seen as a 'going concern' if its auditors believe it will stay in business for the 'foreseeable future'.
A firm is seen as a 'going concern' if its auditors believe it will stay in business for the 'foreseeable future' (as a rule of thumb, this is at least 12 months after its balance-sheet date). This is important because if you remove that assumption, certain standard balance-sheet classifications make no sense.
For example, you can't have assets listed as 'fixed' (longterm) or liabilities classified as 'falling due after more than one year' if the firm is about to go bust. Where going concern is in doubt, accounts may be prepared on a 'break-up' basis.This means assets and liabilities in the balance sheet are reclassified as short term and written down to their 'fire sale' values on the assumption that the business will soon cease.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Revealed: how much you need to earn to afford a house in the UK
News The average UK salary is £20k too low to afford the country's typical house price - we look at just how much you need to earn to step onto the property ladder in the UK
By Henry Sandercock Published
-
Revealed: the countries with the most generous pensions
The UK state pension is often criticised for failing to deliver a comfortable retirement. So, how does our pension system compare to other countries - which countries are most generous, and at what age can you claim a state pension?
By Ruth Emery Published