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Hello sir, please I would like to ask something about going concern concept.
For a business which is set to operate for just a specific period (let say 5years) . Is it subject of going concern here?The concept of going concern specifies a period of 12 months as the “foreseeable future”
Furthermore, the concept is loosely defined as being “the ability of an entity to continue into the foreseeable future with neither the intention nor necessity significantly to curtail the scale of operations of the entity”
The notes to the financial statements would necessarily make very clear the fact that the entity had been formed for a specific period of time or for the purpose of pursuing a specific course of trade, voyage or adventure
It would not be a quoted company – they wouldn’t seek a quotation on a stock exchange! so the shares would not be publicly quoted and freely marketed
If there were such a business, I suppose that its final statement of financial position would be reduced to share capital, retained earnings and cash. A full distribution would be proposed, probably following a purchase of own shares, leaving no assets and no capital / reserves.
(Not really sure about that last bit – it’s never happened in an F7 (nor P2) exam and I have no practical experience of it. I just hope that it has helped!)
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