3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

Violation of Going Concern Assumption in the Automotive Industry Josef Horák 1 , Jiřina Bokšová 2 Škoda Auto University 1, 2 Department of Finance and Accounting Na Karmeli 1457, Mladá Boleslav, 293 01 Czech Republic e-mail: josef.horak@savs.cz 1 , jirina.boksova@savs.cz 2

Abstract The automotive industry ranks among one of the most crucial industrial sectors in several European Union member states. Currently, the automotive industry faces substantial challenges and opportunities that it must adapt to remain competitive. Notably, recent challenges include the impact of the COVID-19 pandemic, shortages of essential components for car manufacturing, and the ongoing transformation of the production process towards electromobility. Automotive manufacturers also encounter new competitors, not only from the United States and South Korea but increasingly from China. Hence, it is essential for European automotive companies to continually analyze their supply chains and identify potential problematic business partners that could negatively affect the performance of European automakers. The submitted article aims to determine whether it is possible to estimate the threat of violation of the going concern assumption in accounting periods prior to the entry of accounting units into insolvency. The research utilizes financial statements from selected companies operating in the Czech Republic. Keywords: automotive industry, European Union, financial statements, going concern assumption, insolvency JEL Classification: M1, M4, O1 1. Introduction Accounting entities are required to maintain accounting records that are accurate, complete, reliable, understandable, clear, and in a manner that ensures the permanence of accounting records. When accounting entities complete their financial statements, they must follow all rules and requirements to correctly present their accounting information. To achieve this goal, accounting entities must adhere to the prudence principle and going concern assumption and subsequently follow accounting legislation or standards such as IFRS, or US GAAP based on the applicable legal regulations in the respective country as well. The main objective is to ensure that users of accounting information (e. g. financial institutions, investors, suppliers, customers, employees, government authorities, competitors, and other relevant stakeholders) receive accurate, trustworthy, and comparable information that enables them to properly evaluate the financial health

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