Going concern & Understandability

Going concern

Financial statements are normally prepared on the assumption that the business is a going concern (i.e. a business that can continue in operation for the foreseeable future) .

In addition to the two underlying assumptions, the Framework also lists a number of qualitative characteristics of financial statements which make the information provided useful to the user groups. The four principal characteristics are understandability, relevance, reliability and comparability.


Understandability
Information provided in financial statements should be readily understandable by users. However, users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with 'reasonable diligence'.


Particularly for large and complex businesses, very detailed explanations of financial
procedures and transactions are provided which might need very specialised knOWl edge
to understand.