Going Concern and hardship: the role of national and international accounting and auditing standards

Among various other consequences, the ongoing economic and financial crisis has also brought deep uncertainty and volatility in cor- porate performance. In this context, the Going Concern assumption takes on special relevance with regard to ability of enterprises to maintain and consolidate its activities over time. The Going Concern assumption is a fundamental principle for the preparation of financial statements. It is reiterated both nationally and internationally. According to this assumption, an entity is viewed as continuing in business for the foreseeable future. A general purpose financial report is prepared on a Going Concern basis, unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Assets and liabilities are therefore recorded on the basis that the entity will be able to realise its as- sets and discharge its liabilities in the normal course of business (IAS1). Furthermore, when an entity has a history of profitable operations and ready access to financial resources, a conclusion that the Going Concern basis of accounting is appropriate may be reached without detailed analysis (IAS 1). Such clear and easy affirmations seem to have lost validity, in the light of the deep, endemic hardship characterizing our times, when both liquidity and credit risk may create new problems or render ex- isting ones harder. In this situation, it is necessary for firms to pay significantly more attention to the concept of Going Concern, than was paid in the past. In the light of the above, the aim of this article is to underline the relationship between Going Concern and the ongoing crisis, also in relation to international and national accounting and auditing standards.