3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

position, performance, and cash flows under the assumption of continued operation. A violation of the going concern principle arises when there are substantial doubts about a company’s ability to continue operating as a going concern. (Effiong, Asuquo and Enya, 2020) These doubts may stem from various factors such as financial distress, recurring losses, insufficient liquidity, or legal and regulatory issues. When a violation of the going concern principle occurs, it indicates that the company’s ability to sustain operations is uncertain. Consequently, its financial statements might require a different approach. In such instances, assets may need to be valued at their liquidation or fire-sale value rather than their going concern value. Additionally, extra disclosures may be necessary to inform stakeholders about the uncertainties surrounding the company’s future. For instance, if a company is experiencing severe financial challenges and can not meet its financial obligations, this would be considered a violation of the going concern principle. Similarly, if a company is in the process of liquidation or faces significant legal or regulatory hurdles that threaten its ability to operate, it would also violate the going concern principle. (Guo, Masli, Xu and Zhang, 2022) The violation of the going concern principle can have serious impacts on a company and its stakeholders. It may obstruct the company’s ability to secure financing, attract investors, or retain customers and employees. Moreover, it may necessitate corrective actions, such as operational restructuring, asset sales, or seeking additional financing, to address the issues jeopardizing the company’s viability. Subsequently, a violation of the going concern principle occurs when significant doubts arise about a company’s ability to continue operating. This necessitates adjustments in financial statement preparation and often requires additional disclosures to inform stakeholders about the uncertainties surrounding the company’s future. In the Czech Republic, users of accounting information can check published financial statements online via the Internet. This is because all accounting entities registered in the Czech Republic and listed in the Business Register are obligated to disclose their financial statements in the Collection of Documents. This Collection of Documents is a part of a public register, freely accessible to everyone, regardless of whether they have a legal interest or not. Financial statements typically include the Statement of Financial Position, Statement of Financial Performance, Cash Flow Statement, Statement of Changes in Equity, and Notes to the Financial Statements. In the Czech Republic, financial statements must be prepared either as a complete set (for medium or large companies) or a condensed set (for micro or small accounting entities exempt from external audit). (Horák and Bokšová, 2018) Micro and small entities may only publish the Statement of Financial Position (a balance sheet). These financial statements are prepared according to Czech legislation or International Financial Reporting Standards (IFRS) if applicable. Companies listed on the European Union or European Economic Area securities markets are obliged to report under IFRS. Annual reports must also be published in the Collection of Documents if the company is obligated to have its financial statements externally audited.

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