The annual report of a major company included the following statement:

Going concern The Directors consider that the Group and the Company have adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the financial statements.6

(a) Explain why the going concern assumption is of importance to a user of an annual report.

(b) Explain the meaning of ‘accruals’ as an underlying assumption when preparing financial statements, and the qualitative characteristic of ‘comparability’.

(c) Explain why a ‘faithful representation’ is of particular importance when presenting financial statements.