The Accounting Review Vol. 43 No. 3 1968
The Going Concern: An Examination.
Abstract
The notion that the going concern concept is necessary for us to account is erroneous. Vatter has pointed out, and rightly, that "we could assume noncontinuity if we wanted to." Thus, there is a free choice to be made. If one chooses to assume a going concern, then that assumption ought to be justifiable and its consequences ought to he carefully worked out. It is thought that one such consequence is historical cost valuation. That consequence is derived by either the non-liquidation or the it-doesn't-make-any-difference argument. It has been demonstrated that the non-liquidation argument is invalid and unsound, and that the it-doesn't-make-any-difference argument is true only in a stationary state. Therefore, the alleged consequence of historical cost is erroneous. It is difficult to justify the assumption of a going concern because of uncertainty about what the future holds, particularly in matters of commerce. Therefore, if the going concern concept is to be retained, it ought to he reinterpreted as a prediction. Another alternative is to purge the going concern concept insofar as it applies to the future of the firm. The change from the venture concept to a going concern concept does not necessitate that the future be predicted or assumed. Instead, it requires only that the measurement be made at a point in time because information is needed prior to a future event. One can measure the change that has occurred in a continuing process without knowledge of how that process will change in the future. Perhaps we could call this the temporal concept in contrast to the venture or event concept. This concept ought to be extended to the valuation of the components of the firm as well as to the firm, and to the valuation coefficients of assets as well as to the quantities of assets.
- DOI
- 10.2308/tar-4496263
- Volume
- 43
- Issue
- 3
- Pages
- 481-502
- Language
- en
- Sources
- crossref openalex