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Going concern in a credit crisis
Join the debate
ACCA is inviting members to take part in a discussion - via its new online discussion board ACCA Discuss - on whether the current economic climate could spell the end of the going concern assumption.
'One of the fundamental accounting concepts is that financial statements are prepared on a going concern basis,' says Steve Priddy, ACCA's director of technical policy and research, 'that is, there is an underlying assumption that the entity will continue in operational existence for the foreseeable future and that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations.'
Priddy looks at the major business failures - both inside and outside the financial services sector - over the past year, and considers how the deteriorating economy and the drying up of liquidity have pushed the issue of going concern up the corporate agenda, leading to the Financial Reporting Council (FRC) revisiting and proposing amendments to guidance it first issued 14 years ago.
He asks: 'Have economic circumstances changed so radically that the application of the going concern concept is no longer applicable or is in some way severely compromised?'
What do you think?
Join the debate 
and you could make a major contribution to ACCA's response to the FRC consultation.