The International Financial Reporting Standards of Going Concern - Assignment Example

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 a need for some further information and guidelines that provide hints to users of financial statements and other interested stakeholders. One of the main areas that are 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 disclose the Going Concern status of the entity in a given period. This provides a standardized basis for a universal approach to reporting going concerns 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.

An examination of the effectiveness of Going Concern reporting in businesses; 3. A practical evaluation of Going Concern reporting in a Kuwaiti entity 4. An analysis of a financial report of a Kuwaiti entity to ascertain the Going Concern reporting procedures. Going Concern Convention “The going concern postulate or continuity postulation, holds that business entity will continue its operations long enough to realize its projects, commitments, and ongoing activities” (Riahi, 2010 p212). Going concerned is therefore a convention that indicates that a business will continue to remain operational and pay its bills and remain liquid into the future.

“Going concerned is not only about the net book value of a firm's assets, but also such elements like goodwill and likely future profitability, assuming the existing management remains in control of the entity” (Brower and Brueschke, 2012). This means that going concern is evaluated and analyzed by the examination of the firm's assets as well as other indicators of continuous operations. Thus, it will involve the hard and soft elements of an entity including the assets and other intangibles like going concern which provides clues on how a firm will remain operational even if the company is assured of getting customers to remain liquid.