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.
The going concern principle allows the company to defer some of its prepaid expenses until future accounting periods.
- The business entity will continue to operate indefinitely
- The long-term assets of the business are not available for sale
- The current values of long-term assets are ignored for the purposes of financial reports since these assets are not available for immediate sale.