Definition
Going Concern
Going concern is the accounting assumption that a company will continue operating for the foreseeable future, underpinning the valuation of its assets and liabilities.
Financial statements are normally prepared on a going-concern basis, meaning assets are carried at values assuming continued use rather than fire-sale liquidation. Management and auditors must assess whether this assumption holds for at least the next year.
If there is significant doubt, the auditor flags it through an emphasis of matter or a modified opinion, and management must disclose the uncertainty. A going-concern warning is a serious signal, often seen at companies facing severe liquidity stress, heavy losses or covenant breaches.
Related terms
- Contingent LiabilityA contingent liability is a possible obligation that may arise depending on a future event, disclosed in the notes rather than recognised on the balance sheet.
- Auditor's ReportThe auditor's report is the independent auditor's formal opinion on whether a company's financial statements give a true and fair view and comply with accounting standards.
- Emphasis of MatterAn emphasis of matter is a paragraph in the auditor's report that draws attention to a disclosed issue without modifying the audit opinion.
- ImpairmentImpairment is the write-down of an asset's carrying value when its recoverable amount falls below what is recorded on the balance sheet.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.