An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that the company will not liquidate in the near future.

What is an example of going concern assumption?

An entity is assumed to be a going concern in the absence of significant information to the contrary. An example of such contrary information is an entity's inability to meet its obligations as they come due without substantial asset sales or debt restructurings.

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.