3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

Table 2: The current status of analysed accounting entities

Number of accounting entities

Current status of the company

An active company with no significant problems with equity An active with significant problems reporting problems with its equity An active company in bankruptcy process with unknown result An inactive company that went into bankruptcy until February 15, 2024

1

14

2

14

Total

31

Source: own elaboration

4. Discussion Based on the conducted research, it is possible to state that the analysis of violation of the going concern assumption and the prudence principle can serve to identify potentially risky accounting units that may exhibit a high risk of insolvency proceedings or bankruptcy in subsequent periods. The accounting entities identified as problematic went bankrupt or entered into insolvency proceedings in the following accounting periods. Some of these proceedings are not currently closed and we do not know more information about them. On the other hand, based on the conducted analysis, companies that still exist at present were saved from insolvency proceedings only by additional payments from the owners of the companies or new investors that increased their equity or merged with another company. As evident from the data presented in Table 2, if an accounting entity shows signs of breaching the going concern assumption and the prudence principle, it is very difficult to overcome the situation independently. One option is to increase the company’s equity through contributions from current owners. Alternatively, new investors can be sought, who would also become owners of the accounting entity. Another solution to the situation could be a merger with another business partner or competitor. The biggest danger, not only for the accounting entity but subsequently also for its suppliers or customers, is its bankruptcy. This can subsequently harm other accounting entities in the chain and trigger a chain reaction affecting the financial performance of other cooperating entities.

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