Going concern

Before signing your Accounts, we'll have asked you whether your company is a 'going concern'.

We're not being rude! It's actually a legal requirement and we look at why this is here.

What is a going concern? Being a going concern is the legal term for a business that is operating and making enough money to (as a minimum) stay afloat. A going concern can pay what it owes to its suppliers and staff when the amounts are due. It isn't expecting to run into financial difficulty which would put its future at risk.

In other words, the management has no reason to believe that the company won't be here and doing what it does in the future.

Why do we ask you this? When preparing your Accounts, the law says that the management of the company (i.e its Directors) must make an assessment of whether the company is a going concern. If it is, all well and good. But if it's not, the Accounts need to be put together differently, including a legal requirement to note this issue.

What should you consider?

Generally, the company can be considered a going concern unless its management either intends to liquidate the company, or cease trading, or has no realistic alternative but to do so; for whatever reason.

In assessing whether the company is a going concern, management needs to take into account all available information about the company's future; looking forward at least over the following 12 months from the date when the Accounts are signed.