Going Concern Principle
The assumption that a business will continue operating indefinitely, allowing for long-term asset valuation and expense allocation rather than liquidation value.
Going Concern Principle
The accounting assumption that a business will continue to operate indefinitely, rather than be liquidated in the near future. This justifies recording assets at historical cost rather than liquidation value.
For example, a manufacturing company records machinery at its historical cost minus accumulated depreciation, rather than at its potential scrap value, based on the assumption that the business will continue using the equipment for its intended purpose.
The going concern principle allows businesses to defer certain expenses, depreciate assets over their useful lives, and exclude liquidation costs from financial statements. When significant doubt exists about a company’s ability to continue, both management and auditors must assess and disclose these uncertainties.