An example of the going concern principle
One of the fundamental accounting concepts is that of going concern. In simple terms, this typically means a business is unlikely to be able to continue in operation for the next 12 months.
It is not very often the examples come to light, but recently in Ireland we had one. The national football association, the Football Association of Ireland, has their auditors state the organisation could not be deemed a going concern. According to the RTÉ news website, the auditors noted:
“While the company has received some advanced funding from UEFA during 2019 to enable the company to meet some of its current liabilities there is not sufficient audit evidence that the company will be able to meet its liabilities as they fall due. Therefore we are unable to obtain sufficient audit evidence to support the assumption that the company will continue as a going concern.”
The piece also notes the levels of debt and losses over several years. The statement above provides a nice clear understanding of what going concern means. Do have a read of the RTÉ article and other coverage to get more insights on the association.