GOING CONCERN ASSUMPTION.
The going concern concept is defined as the assumption that the enterprise will continue in operational existence in the foreseeable future.
This means that the income statement and balance sheet assume no intention or necessity to
liquidate .
If financial statements are not prepared on a going concern basis, that fact should disclosed,
together with the reasons for such a treatment.
When preparing financial statements, management must make an assessment of the
enterprise's ability to continue as a going concern. The auditor will then consider management's assessment.
Management should generally look ahead at least one year from the balance sheet date, in
assessing the validity of the going concern basis, but there are circumstances in which it is
appropriate to look further ahead. This depends on the nature of the business and the associated risks.
In the absence of a clear note to the contrary, there is a presumption that the financial
statements have been prepared on a going concern basis.