Going Concern
The assumption that a company will continue operating for the foreseeable future, at least the next 12 months.
What is Going Concern?
Going concern is a fundamental accounting assumption that a company will remain in operation for the foreseeable future — typically interpreted as at least 12 months from the date the financial statements are issued. Financial statements are prepared on this basis; assets are recorded at historical cost rather than liquidation value. When an auditor has substantial doubt about a company's ability to continue as a going concern — due to recurring losses, negative cash flow, or inability to meet debt obligations — they must include an explanatory paragraph in their audit report. A going concern opinion (sometimes called a going concern qualification) is a serious red flag for investors and lenders, often triggering a covenant violation or causing a company's stock price to fall sharply.
Example
Peloton's auditor issued a going concern opinion in its FY2023 10-K after the company burned through cash following its pandemic-era boom, raising substantial doubt about whether the company could meet its obligations for the next 12 months without additional financing or a significant improvement in operations.
Source: Investopedia — Going Concern