The going concern concept is a key assumption under generally accepted accounting principles, or GAAP. It can determine how financial statements are prepared, influence the stock price of a publicly traded company and affect whether a business can be approved for a loan.

Why is the going concern assumption important?

The concept of going concern is crucial to shareholders because it demonstrates the stability of the entity. This assumption can affect the stock price of the business and their ability to raise capital or draw in more investors.

Why is it important to disclose going concern?

Going Concern Disclosure

The going concern assumption is essential in establishing the value of an entity's assets and liabilities. The length of the forward-looking period matters because financial statements lose their relevance when updated audited financial statements become available.