Going concern
The going concern assumption holds that a business will continue operating for the foreseeable future, justifying assets being carried at cost; if the assumption is seriously in doubt, disclosure and restatement are required.
FrameworkAccounting concepts
See it move
Financial statements normally assume a business will keep operating for at least twelve months, so assets are carried at cost rather than what they would fetch in a fire sale. If persistent losses, negative operating cash flow or a breached loan covenant put that continuation in serious doubt, the measurement basis shifts to forced liquidation, and assets are restated at their realisable break-up value.
Check yourself
A company's directors conclude at the year-end that the going concern assumption cannot be maintained and that the business is likely to be wound up. Which accounting response is required?