Management's going concern assessment

Learning objectives

• Explain how management assesses the entity's ability to continue as a going concern and when a material uncertainty must be disclosed.L1
• Determine, from the facts of a case, whether the financial statements are prepared on a going concern basis.L1, L2

Normative references

• IAS 1 §25When preparing financial statements, management assesses the entity's ability to continue as a going concern; the financial statements are prepared on a going concern basis unless management intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so; material uncertainties about the entity's ability to continue as a going concern are disclosed.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• An entity that made a profit for the year is exempt from assessing its ability to continue as a going concern when it prepares its financial statements.L1
• When finalising the accounts for 2026, the management of Aube SA decided to liquidate the entity in the first half of 2027 and acknowledges that there is no realistic alternative (case facts). How must the financial statements for 2026 be prepared?L2
• Which statements about the going concern assumption are correct? More than one answer is possible.L1