The going concern assumption presumes the entity will continue operating for approximately how long?

The going concern assumption presumes the entity will continue operating for approximately how long?

• A. 12 months.
• B. 24 months.
• C. 36 months.
• D. Indefinite.

Answer: (A)

Going concern is the assumption that a business will continue operating for the foreseeable future. In practice, this horizon is at least the next year from the end of the reporting period, unless management expects to liquidate or has no realistic alternatives. This basis allows assets to be valued and depreciation and accruals to be calculated in the normal way. Longer fixed periods or an indefinite horizon would conflict with the idea of a finite, predictable future for planning and reporting.

Going concern is the assumption that a business will continue operating for the foreseeable future. In practice, this horizon is at least the next year from the end of the reporting period, unless management expects to liquidate or has no realistic alternatives. This basis allows assets to be valued and depreciation and accruals to be calculated in the normal way. Longer fixed periods or an indefinite horizon would conflict with the idea of a finite, predictable future for planning and reporting.