5.0 Evaluation of Ford Motor Company’s financial statements adherence to GAAP 5.1 Going Concern Concept
The going concern concept is the assumption that an entity prepares financial statement on a going concern under the assumption that the entity will remain in business for the foreseeable future. The entity also will not be forced to liquidate its asset in near future (Or & Raymaker, 2014). Generally, the term foreseeable future indicates a period of 12 months. In the case that an entity may not be going concern due to the fact that the entity has to liquidate its operation, the going concern concept cannot be used in the financial statement. It must be reported differently using others basis. The going concern basis has become an issue …show more content…
It is going concern. As it can be seen from picture 1, a typical company that is unable to going concern, it has to liquidate its asset into cash to pay back its liability. The amount of cash should be incredibly high compare to net property. Importantly, inventories must be significantly low as the business is no longer producing outputs, products, and inventories. From picture 2, the amount of total assets is higher than the amount of liabilities indicating that the company has sufficient resources to pay back debt in case that the business is going …show more content…
The information provided must be comparable to other information provided in a different accounting periods. It allows users to determine changes and make decision based on the comparison between different periods of time (Kaplan Financial, 2015). The information must be relevant to end users. If the information provided in not useful for investors, then it should not be presented. One significant characteristic is reliability. Not only that the information must be accurate without significant material error and bias, it should be timely, and updated. It allows users to make decision by using updated and most accurate information available. Understandability is one important characteristic. The content must be comprehensible for users to understand and interpret. It should not contained misleading content that could potentially change the original facts stated (Christiansen & Koldertsova,
The going concern concept is the assumption that an entity prepares financial statement on a going concern under the assumption that the entity will remain in business for the foreseeable future. The entity also will not be forced to liquidate its asset in near future (Or & Raymaker, 2014). Generally, the term foreseeable future indicates a period of 12 months. In the case that an entity may not be going concern due to the fact that the entity has to liquidate its operation, the going concern concept cannot be used in the financial statement. It must be reported differently using others basis. The going concern basis has become an issue …show more content…
It is going concern. As it can be seen from picture 1, a typical company that is unable to going concern, it has to liquidate its asset into cash to pay back its liability. The amount of cash should be incredibly high compare to net property. Importantly, inventories must be significantly low as the business is no longer producing outputs, products, and inventories. From picture 2, the amount of total assets is higher than the amount of liabilities indicating that the company has sufficient resources to pay back debt in case that the business is going …show more content…
The information provided must be comparable to other information provided in a different accounting periods. It allows users to determine changes and make decision based on the comparison between different periods of time (Kaplan Financial, 2015). The information must be relevant to end users. If the information provided in not useful for investors, then it should not be presented. One significant characteristic is reliability. Not only that the information must be accurate without significant material error and bias, it should be timely, and updated. It allows users to make decision by using updated and most accurate information available. Understandability is one important characteristic. The content must be comprehensible for users to understand and interpret. It should not contained misleading content that could potentially change the original facts stated (Christiansen & Koldertsova,