Going concern is an accounting principle that assumes a business will continue to operate for the foreseeable future and has no intention or need to stop trading or wind down. Most company accounts are prepared on this basis.
Why the assumption matters
If accounts are prepared as a going concern, assets are valued on the basis that the company will keep using them. If that assumption no longer holds, accountants may need to value things differently and flag the risk.
What it signals to a lender
A clean going-concern statement in your accounts suggests your accountant believes the business is viable. A qualified or uncertain statement is a warning sign that a lender will want to understand.
- It reflects a forward-looking view of viability.
- It is a judgement, not a guarantee.
- Directors are responsible for the assessment behind it.
Credicorp assesses limited companies and LLPs on a rounded view of trading. If you are unsure how your accounts read, your accountant can explain the going-concern note to you.
See also: What is a holding company?, What is a judgment debt? and What is a negative pledge?.