The silly ways accountants explain going concern

Here are some more ludicrous expressions used by accountants to explain going concern

Concept or assumption

Many accountants call going concern a concept and then contradict themselves that it is an assumption and not a concept at all. Take the ACCA (The Association of Chartered Certified Accountants) in their global site. They state:

“The concept of going concern is an underlying assumption in the preparation of financial statements…”  [1]

Perhaps it’s both. But most probably a concept here can be an assumption, but an assumption cannot be a concept.

There are apparently going concern principles to be applied within the concept.

A principle or a standard

Going concern is not a standard, but sometimes accountants get into a twist and unintentionally declare that it is one. One such example comes in the heading of an article explaining guidance statements issued by the FASB:

“What FASB’s Going Concern Standard Really Means For Your Company.”  [2]

And then in the very first sentence, the article states that going concern is an assumption. I consider that these inadvertent errors are not part of accountants’ objective to make things complicated for non-accountants, but it does add to the overall confusion surrounding going concern.

Although going concern is not a standard, there is a paragraph in IAS1, the very first IFRS standard where they state that management must assess whether their company can ‘continue as a going concern’ and prepare the financial statements accordingly.

The accounting institutes and the accounting boards which set standards do not admit that going concern is a principle. They do call it a concept but not a principle. It is the accounting organisations which explain what going concern is to non-accountants and beginner-accountants that elevate the term to be a principle.

Wikipedia is probably the best example. They throw in this sentence under the heading Accounting in their explication of going concern:

“The going concern principle allows the company to defer some of its prepaid expenses until future accounting periods.”  [3]

And they are not alone. Some business schools use going concern as a principle, several accounting blogs written by qualified accountants, accounting software companies, accountancy training organisations and many others.  By calling going concern a principle at the start of learning what it is adds to the general confusion around its definition and accountants do nothing to correct the error to keep the confusion alive.

 [1] Source

[2] Source

[3] Source , Version May 2022

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