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Going Concern: Definition and Meaning
Definition
Going concern is the assumption that an entity will continue operating for the foreseeable future and does not intend or need to liquidate.
Why It Matters
The going-concern assumption affects how financial statements are prepared and evaluated. Management and auditors may consider factors such as recurring losses, cash flow, debt maturities, financing availability, covenant compliance, customer concentration, legal matters, and the company’s plans to address conditions that raise questions.
A going-concern assessment requires judgment and depends on the facts and circumstances of the entity.
Example
Management evaluates whether its company can meet obligations, obtain needed financing, and continue operations over the relevant assessment period.
Related Terms
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