as the going concern assumption.
of evidence to the contrary, there is an assumption that a
will continue on into the future must as it has in the
will be in existence long enough to complete all
currently engaged in.
will continue on into the future for an indefinite period.
- refers to an entity's ability
to continue to operate such that it will be able to realize
its assets and meet its obligations in the ordinary course
expected to comment upon situations where there is doubt
that a client
entity will be able to continue as a going concern.
- Under U.S. generally accepted
accounting principles (GAAP), financial statements are
prepared under the inherent presumption that the reporting
organization will be able to continue as a going concern.
The going concern presumption is critical to financial
reporting because it establishes the fundamental basis for
measuring and classifying assets and liabilities.
continuity assumption mean that an entity has an unlimited
life? Why or
- Proposed FASB
(issued 10/09/08) [Download]
the business can be kept separate and apart from its
owners and other
necessarily refer to legal entities, but to
or reporting, entity.
establish the boundaries of accountability.
of an entity can be broken down into smaller periods of
time, often a
but perhaps a month or a quarter, and the results of the
over that time period can be measured and reported and the
process will be useful to the users of the financial
measurement of the results of an entity's operations would
occur at the
end of its life. Given the going concern assumption,
however, the end
the entity's life is not definite. Users cannot wait
period chosen is an artificial period. The shorter
less precise, but more relevant, the information will be.
Leads to the
trade-off between relevance and reliability in compiling
and events are measured and denominated in a monetary
unit provides an appropriate basis for accounting
unit utilized remains stable over time.
impact of inflation on the unit of measure.
of relatively high inflation, this assumption is suspect
and may lead
less meaningful financial statements.