Page 104 - Auditinf Electronic System

Second: definition of Going concern:

▪ Going concern" is an accounting term used to describe a business that is expected
to operate for the foreseeable future or at least the next 12 months. It assumes
that the business can generate income, meet its obligations due without the plan
or the need to liquidate or restructuring its loan in the coming year.

▪ The going concern concept is a key assumption under generally accepted
accounting principles (GAAP) & International financial reporting standards
(IFRS). It can determine how financial statements are prepared, (on historical
cost basis or liquidation basis). Which influence the stock price of a publicly
traded company and affect whether a business can be approved for a loan.
This term also refers to a company's ability to make enough money to stay afloat
or to avoid bankruptcy. If a business is not a going concern, it means it's gone
bankrupt and its assets were liquidated (in other terms it is doomed !!)

Third: How is going concern determined

It is the responsibility of the company Management to determine whether the
business is able to continue in the foreseeable future for a period of at least 12
months. If it’s determined that the business is stable, financial statements are
prepared using the going concern basis of accounting. This allows some prepaid
expenses to be deferred until a later date & evaluating most assets and liabilities at
their historical cost

Fourth: Management responsibility relating to going concern

1. IFRS requires management to make an assessment of an entity’s ability to
continue as a going concern (to continue its operations for a reasonable period
of at least 1 year from the date the financial statements are issued) and
Appropriateness of going concern assumption. in their preparation of the
financial statements this requires:

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‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬