A going concern is a business that functions without the intention or threat of liquidation

for the foreseeable future, usually regarded as at least within 12 months.

Use in Accounting
In accounting, "going concern" refers to a company's ability to continue functioning as a
business entity (concern being an early-20th century term for "business" or "enterprise").
It is the responsibility of the directors to assess whether the going concern assumption is
appropriate when preparing the financial statements. A company is required to disclose in
the notes to the financial statements whether there are any factors that may put the
company's status as a going concern in doubt.
Financial statements are prepared on the assumption that the entity is a going concern,
meaning it will continue in operation for the foreseeable future and will be able to realize
assets and discharge liabilities in the normal course of operations. Different bases of
measurement may be appropriate when the entity is not expected to continue in operation
for the foreseeable future.[1] Where a company is not a going concern, the break-up basis
is used where all assets and liabilities are stated at Net Realizable Value.
The company's auditor must consider whether the use of the going concern assumption is
appropriate, and whether there are material uncertainties about the entity's ability to
continue to operate as a going concern that need to be disclosed in the financial
statements.[2] An auditor who concludes that substantial doubt exists with regard to the
appropriateness of the going concern assumption is required to issue an opinion reflecting
this; a modified opinion if the company has appropriately disclosed the doubt and risks
and a qualified opinion if the company has not made appropriate disclosures.[3] These are
called "going concern" opinions (the terminology is counter-intuitive; such opinions are
issued because the company is NOT expected to remain a going concern).
Financial statement users, businesses, and legislators believe that auditors can make two
types of errors in such opinions - issuing a modified report for a company that remains
viable and failing to issue a modified report for a company that becomes bankrupt before
the next audit. Research has shown that only a small fraction of companies receiving
modified reports become bankrupt, and that receiving such a report increases the
likelihood that the company will change auditors. Through 2001, roughly half of
companies that do become bankrupt had a modified opinion on their immediately prior
financial statements, though this percentage has since risen higher. Auditors are at risk of
being sued by financial statement users if a company that did not receive a modified
opinion becomes bankrupt, although litigation reform in the 1990s lowered the risk of
being sued and the liability if such a suit is successful.[4][5]
[edit] Use in Risk Management
If a public company reports that its auditors have doubts about its ability to continue as a
going concern, investors may take that as a sign of increased risk, although an emphasis
of matter paragraph in an audit report does not necessarily indicate that a company is on
the verge of insolvency.[6] Despite this, some fund managers may be required to sell the
stock to maintain an appropriate level of risk in their portfolios. A negative judgment
may also result in the breach of bank loan covenants or lead a debt rating firm to lower
the rating on the company's debt, making the cost of existing debt increase and/or
preventing the company from obtaining additional debt financing. Because of such
responses to expressed concerns by auditors, in the 1970s, the American Institute of
Certified Public Accountants' Cohen commission concluded that an auditor's expression
of uncertainty about the entity's ability to continue as a going concern "tends to be a self-
fulfilling prophecy. The auditor’s expression of uncertainty about the company’s ability
to continue may contribute to making it a certainty."[3]
Going concern principle in accounting: The life of the business is considered continuous
and reports are kept on this basis.