<P> This accounting principle assumes that, a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future . If the company's financial situation is such that the accountant believes the company will not be able to continue on, the accountant is required to disclose this assessment . </P> <P> The going concern principle allows the company to defer some of its prepaid expenses until future accounting periods . The going concern assumption is a fundamental assumption in the preparation of financial statements . Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations . Accordingly, unless the going concern assumption is inappropriate in the circumstances of the entity, assets and liabilities are recorded on the basis that the entity will be able to realize its assets, discharge its liabilities, and obtain refinancing (if necessary) in the normal course of business . </P> <P> An entity is assumed to be a going concern in the absence of significant information to the contrary . An example of such contrary information is an entity's inability to meet its obligations as they come due without substantial asset sales or debt restructurings . If such were not the case, an entity would essentially be acquiring assets with the intention of closing its operations and reselling the assets to another party . </P> <P> If the accountant believes that an entity may no longer be a going concern, then this brings up the issue of whether its assets are impaired, which may call for the write - down of their carrying amount to their liquidation value, and / or the recognition of liabilities that arise on account of the entity's imminent closure (which may not arise otherwise). Thus, the value of an entity that is assumed to be a going concern is higher than its breakup value, since a going concern can potentially continue to earn profits . </P>

Indicators that a company is not a going concern