More insolvencies, more doubts – the end of going concern?
In 2024, the number of corporate insolvencies in Germany rose by over 22% compared to the previous year – and there is no end in sight to this trend. Tighter economic conditions, increasing geopolitical tensions and ongoing pressure on international trade relations, particularly with the USA, are putting many companies in existential difficulties.
Against this background, a central accounting question is becoming increasingly important: Is the going concern assumption still justified in the annual financial statements under commercial law?
What does commercial law say about the going concern assumption?
According to Section 252 (1) No. 2 HGB, the going concern assumption applies when preparing the annual financial statements – i.e. the assumption that the company will continue as a going concern in the future. However, this assumption must not remain unfounded: as soon as legal or factual circumstances indicate that the company will not continue as a going concern, the assets may have to be valued at liquidation value.
The decisive factor here is the so-called forecast period: this comprises at least twelve months from the reporting date. In special cases – such as delayed preparation or specific crisis signals – a longer period can also be included in the analysis.
Short-term financing, covenant breaches and liquidity risks
Short-term financing commitments without a contractual commitment (“b.a.w.” financing), covenant breaches or expiring loans without follow-up financing should be examined particularly critically. Although these may initially remain in place, the termination rights of creditors represent a risk. If such a risk is not sufficiently analyzed, there is a risk of doubts about the going concern assumption – with corresponding effects on the balance sheet, notes and management report.
What companies should do now
Managing directors and board members are obliged to present sound corporate planning – especially if the economic situation is critical or fair-weather criteria (e.g. permanently positive earnings situation, stable financing) are no longer met. Without plausible, integrated planning, a proper assessment of the company’s ability to continue as a going concern is hardly possible – and a departure from the going concern assumption cannot be ruled out.
Our offer for you
As experienced tax advisors and auditors, we advise you on the assessment of your going concern forecast, support you in your business planning and help you to recognize potential uncertainties in good time – before it is too late.
Posted on 18.06.2025
Obligatory disclaimer: The content presented in this article is for general guidance only and does not replace individual advice. Each individual case is different and requires a specific legal and economic assessment. Despite careful research, we assume no liability for the accuracy, completeness or timeliness of the information.
