IDW publishes guidance on Going Concern and insolvency

Berlin, September 11, 2025 – The German Institute of Public Auditors (IDW) has published a significant guidance document addressing the assessment of a company's ability to continue as a going concern and the implications of potential insolvency. Titled "Questions and Answers: Going Concern and Insolvency," the paper aims to provide clarity on practical considerations for preparing and auditing financial statements, particularly in the current climate of increased economic risk for businesses.

The guidance emphasizes the responsibilities of both management and auditors in evaluating a company's viability. Under German Commercial Code (HGB), financial statements are typically prepared on the assumption that the company will continue to operate. However, this assumption must be critically assessed when there are indications that the entity may not be able to continue its activities.

Key aspects highlighted in the publication include the obligation for management to assess the going concern assumption. If there are no significant doubts, and the company has a track record of profitability and adequate liquidity, a prognosis period of at least 12 months from the balance sheet date is generally sufficient. In cases where significant uncertainties are identified, assets must be valued at liquidation values rather than as going concern values.

Furthermore, under Germany's Act on the Stabilization and Restructuring Framework (StaRUG), management has an ongoing duty to monitor developments that could jeopardize the company's existence. This necessitates a continuous forecasting obligation extending at least 12 months beyond the balance sheet date. BDO AG, with its expertise in auditing and financial advisory, assists clients in navigating these complex regulatory requirements and ensuring compliance.