Which of these reflects the impact of the Going Concern Assumption on financial statements?

The Going Concern Assumption is fundamental in accounting, as it presumes that a business will continue to operate for the foreseeable future. This assumption affects the way financial statements are prepared and interpreted.

When we look at the expected future cash flows, this assumption directly impacts the assessment and presentation of an entity's assets and liabilities. Since financial statements are prepared under the assumption that the entity will remain operational, they reflect not only the current financial position but also the anticipated future performance and cash flow generation capabilities. This is crucial for stakeholders, who rely on these forecasts for decision-making purposes, such as investments or lending.

By considering expected future cash flows, the assumption helps to present a more realistic view of the company’s financial health, as it is not merely about current profitability or historical costs, but about what the business is expected to generate over time. This perspective can affect how assets are valued and the timing and recognition of revenues and expenses in the financial statements.