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MARIYA JOHNSONMARIYA JOHNSON asked 1 year ago

Sir,
“Use of entity’s Going concern assumption being appropriate”…..what does this phrase mean?
Entity’s going concern is adversely affected since they are shutting down their business , but they makes adequate disclosures about the same…
                                                                                            Or
Entity’s going concern is  not affected because of the presence of strong mitigating factors ..Hence entity is considered to be in existence for the foreseeable future…
 

2 Answers
RaviRavi Staff answered 1 year ago

Whether Going Concern assumption is appropriate means —

 

Scenario 1:- It appears that company will be able to continue for next 12 months and they are doing accounting as normal enterprise considering historical concept & depreciation

 

Scenario 2:- It appears that company wont be able to continue for next 12 months and they have shifted on liquidation basis
Now disclosure is different thing

 

Company has to disclose

 

 

  1. Principle events & conditions creating significant doubt over going concern
  2. Material uncertainty and related statements
  3. If going concern is invalid then express it in notes to accounts
RaviRavi Staff answered 1 year ago

your second statement is appropriate going concern assumption is valid

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