Final answer:
If the going concern assumption is not valid, a disclosure must be made including the reasons why the assumption is not applicable and how this affects the financial statements of the company.
Step-by-step explanation:
If the going concern assumption is not followed, that fact must be disclosed, as well as the reasons why the company is not considered a going concern and the implications this has for its financial statements. When a business cannot assume that it will continue operating for the foreseeable future, it must provide additional information to users of its financial statements. This may include noting that its assets are being measured for liquidation values rather than as if they would continue to be used in normal operations, and that the financial statements may thus look very different from those prepared under the going concern assumption.