Do you have a slight feeling that your company, or a portion of it, will fail? You can avoid it by filling out a business form. A going concern account is one that you can open to avoid bankruptcy; and the sale of your property or assets. In this article, we’ll look at the term “going concern” in definition, what its concept is, and how to do a VAT transfer without breaking the law.
Going Concern
Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely; until it provides evidence to the opposite. It is a business that auditors expect to stay active for the foreseeable future. The going concern principle assumes the goal is to operate rather than liquidate the business. Going concern is an accounting term for a company that is financially stable enough to meet its obligations; continue its business for the foreseeable future. You can submit certain expenses and assets in financial reports if your company is to be a going concern. In conclusion, If a business is not a going concern, it means it will go bankrupt; and there will be selling off assets.
Going Concern Concept
The accounting concept of a going concern implies that the business entity will continue to operate in the future; and will not be in compel to cash or cease operations for any reason. If there is no reason to believe that a company will or must cease operations in the near future, it is considered a going concern.
For accountants, the going concern concept is critical because if a company is a going concern; it must prepare financial statements in accordance with an applicable financial reporting framework. Such as generally accepted accounting principles in the United States (US-GAAP) and international financial reporting standards (IFRS).
However, the concept of a going concern applies to the entire company’s operations or the whole of the entity. Hence If a company, for example, closes a small business segment or discontinues one of its products while continuing to sell others. This does not mean the company is no longer a going concern because the going concern concept applies to the entity as a whole, not to the specific business segment or product.
Another example, due to a lack of cash flow, the Small business is unable to make payments to its creditors. At the request of one of the company’s creditors, the court orders the company’s liquidation. The company is no longer a going concern because; there is enough evidence to believe it will be unable to continue its operations in the future.
Going Concern Definition?
The definition of going concern is a company that is in demand to meet its financial responsibilities as they are right to be payable. For the foreseeable future, which is usually at least the next 12 months, it operates without the threat of liquidation. The going concern opinion is a fundamental accounting opinion in its definition.
Also in its simplest definition, the company must be able to continue its operation long enough to fulfill its commitments, obligations, and objectives, among other things; in order to be in view as a going concern. In other words, the company will not be enforce to liquidate or close down. Likewise the ability of a company to make enough money to stay afloat; or avoid bankruptcy is also relating to this term. In the definition of going concern, if a company’s ability to meet the going concern opinion is in doubt; the facts and circumstances must be open in its financial statements.
Transfer Of A Going Concern
A transfer of a business as a going concern refers to the transfer of all or a portion of a business; to a taxable person for the purpose of continuing the acquired business. A transfer of a business as a going concern (TOGC) is the sale of a business that includes assets that must be treated as; “neither a supply of goods nor a supply of services” as a matter of law if certain conditions are met. Thus the seller is always responsible for applying the proper VAT treatment and will be held accountable for their decision. This brings us to the subject of VAT transfer of a continuing business.
VAT Transfer Of Going Concern
The requirements that must be in fix for a business or asset transfer to be view as a transfer of a going concern (TOGC) for VAT purposes. It examines the transfer of an asset as a business, what the term “same kind of business” means; who is taxable, and what can be operated separately. When you transfer a business, it is neither a supply of goods nor a supply of services and is therefore exempt from VAT.
The Conditions For VAT-Free Treatment Of A Transfer Of Going Concern:
- The assets must be sold as a business, or part of a business, as a going concern
- The assets must be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business; as that carried on by the transferor in relation to that part (HMRC guidance uses the words “intend to use…” which, in some cases may provide additional comfort)
- There must be no break in trading
- Where the seller is a taxable person, the purchaser must be a taxable person already or immediately become, as a result of the transfer, a taxable person
- Where only part of a business is sold it must be capable of separate operation
- There must not be a series of immediately consecutive transfers
- Where the transfer includes property that is standard-rated, either because the seller has opted to tax it or because it is a ‘new’ or uncompleted commercial building the purchaser must opt to tax the property and notify this HMRC no later than the date of the supply. This may be the date of completion or, if earlier, the date of receipt of payment or part payment (eg; a deposit). There are additional anti-avoidance requirements regarding the buyer’s option to tax
Is a Going Concern Good or Bad?
Going concern is considered good for the time being; because if your organization is experiencing financial difficulties but it can still able to make necessary payments to stay afloat it is a good one.
What Does the Concept Going Concern Mean?
The accounting concept of a going concern implies that the business entity will continue to operate in the future and will not be forced to cash or cease operations for any reason. If there is no reason to believe that a company will or must cease operations in the near future, it is considered a going concern.
What Is Principle of Going Concern?
The going concern of a business is a key accounting principle. It is foolish to believe that the entity will continue to operate for the foreseeable future. On the other hand, it indicates that the entity does not intend to liquidate its assets or anticipates being compelled to do so.
What Is Another Term for Going Concern?
Extremely productive and profitable. favorable. beneficial. fat. bountiful.
What Is the Difference Between Accrual and Going Concern?
1. Going concern: The assumption that a company entity will continue to operate in the near future.
2. Accrual basis: The concept that the financial consequences of transactions and events are recognized as they happen rather than when cash is collected or paid.
