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Global investment house ksc.
Finance & Accounting
Pages 22 (5522 words)
Background Going Concern is a major element for the preparation of financial statements. Basically, a financial statement provides information about the position and trading of a given period. However, in order to provide information in a comprehensive and understandable manner, a financial statement needs to give information about the preceding and future years of the entity in question.
The income statement on the other hand focuses on the period, usually 12 months within which the accounts were prepared. However, the information about what happened in the past years and the asset and liability position does not provide all the needs of all the users of the financial statements. There is the need for some further information and guidelines that provides hints to users of financial statements and other interested stakeholders. One of the main areas that is of great importance is a prediction of the survivability of the business into the foreseeable future. This is known in general as the “Going Concern” convention. In the International Financial Reporting Standards (IFRS), there is a standard that ensures that going concern is reported in the financial statement. IAS 1 requires that financial statements a disclose the Going Concern status of the entity in a given period. This provides a standardized basis for a universal approach to reporting going concern that can aid comparability on a year-by-year basis as well as a company-to-company basis. Research Problem Clearly, Going Concern reporting as stipulated by IAS 1 seeks to ensure that financial statements reflect the survivability of the entity the report is prepared about. ...
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