Going Concern im Jahresabschluss

“Will the company continue? What do you mean? Yes, what else?”

This is a typical reaction of many managing directors when they are asked about the problem of whether a running business is to be assumed in a valuation of the company. The reason for this question may be overindebtedness or payment problems. In this case, the regulations of insolvency law give reason to assume that the company (GmbH, AG, GmbH & Co. KG) can no longer be continued. Therefore, in this situation, the management responsible for preparing the annual financial statements should not rely on the fact that it can continue to prepare the balance sheet at going concern values. It must first be ensured that the going concern premise is met, i.e., that it can be assumed in the evaluation of the company’s activities that it can be continued.

Negative equity or payment difficulties – going concern in the annual financial statements

The German Commercial Code (HGB) states that the valuation of assets and liabilities must assume that the company is a going concern, unless factual or legal circumstances prevent this (§ 252 (1) no. 2 HGB). This principle is applied until circumstances become apparent that make continuation within a period up to the end of the following fiscal year improbable. The significance of this provision is shown by the fact that even the tax advisor of a company who is in charge of preparing the annual financial statements cannot assume that the balance sheet has been prepared at going concern values if there are negative indications. The Federal Court of Justice (BGH) has established that the tax advisor has a duty to advise and warn, which leads to the tax advisor’s liability in the event of non-observance.

The continuation of the enterprise may be endangered if the enterprise shows negative equity capital or is in payment difficulties. Then countermeasures must be taken – also for the balance sheet!

It’s all about the forecast – what does the future hold?

The consequence of not being able to continue as a going concern is not inevitable and it depends on a precise assessment of the situation. Because of the far-reaching adverse consequences of not being able to continue as a going concern, the circumstances must be severe.

A precise assessment is made, for example, by determining the company’s hidden reserves or by means of a professional and situation-related going concern forecast, which anticipates the development of earnings and cash flows. If the forecast is positive, the balance sheet can be drawn up at going concern values.

In such cases, the experts at THE MAK’ED TEAM prepare the situation-related going concern forecast and, if necessary, provide your tax advisor with the information he needs to assess the going concern premise. Parallel processes hardly delay the preparation of your annual financial statements.

The time factor should not be underestimated

There are clear deadlines for the preparation of annual financial statements under commercial law. If additional tasks arise during the preparation, time can become tight. In order not to be surprised by this problem when preparing the annual financial statements, a permanent view of the economic development is obligatory. This includes ongoing bookkeeping, ideally close to the balance sheet.

The ongoing consideration of write-offs and valuations in current assets (e.g. individual value adjustment) and the creation of provisions as required (e.g. in the case of court cases) provide a clear picture of the development of results. If this falls into the category of year-end closing work, surprises are inevitable.

The experts at THE MAK’ED TEAM support small and medium-sized companies in their accounting tasks and in the preparation of their annual financial statements in accordance with commercial law. This enables you to react to developments at an early stage – in the sense of good corporate governance.


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