For the following scenario, provide 3 factors that support for and 3 factors against the company being a going concern. Conclude on how this going concern issue should be presented in the companys financial statements.

Jettison Industries Inc. (JII) manufacturers specialized parts to be used within energy infrastructure. The industry is highly competitive for servicing the energy sector, however, JII has produced a truly unique product that has been patented worldwide. The company has historically lost money, but in 2018 signed a major supply agreement worth over $80 million to supply Ukraine with these parts.

	For Going Concern
1
2
3
	Against Going Concern
1
2
3
	Conclusion on going concern:

It is now 2021, with the 2020 annual audit underway. The company had quite the year in 2020, where they acquired a new company to begin the year and began signing supply agreements within the France for their specialized parts. None of these agreements have been material to the companys operating results, so they have only seen a modest growth in sales from this acquisition. They do expect sales in France to continue to grow at 15% per year for the foreseeable future. In order to fund this acquisition, JII took on a major bank loan which pushed their debt to equity ratio below industry standards at 1.5 to 1.

Meanwhile, the supply agreement with Ukraine has gone south. A company with Ukraine learned how JIIs technology works and has copied the product. This company has strong government ties and has managed to take over the supply of these parts to the energy sector in Ukraine. As a result, we went from having a modest profit in 2019 to being substantially unprofitable in 2020. We are discussing with lawyers whether we can sue the Ukraine government to honour the contract; however, these types of lawsuits are often drawn out and costly.

The company was also focused on expanding to other regions of Europe in 2020; however, because of a new global pandemic causing employees to work from home, the demand for our specialized energy part has diminished. However, using our quick thinking and in-house engineering skills, we developed a new product for at-home workers that will help reduce their energy consumption. We have high hopes for this product, but we need to figure out a way to raise some money to be able to market it, because without additional funds, we figure it will be a wasted effort. Currently, we do NOT generate enough sales to cover our monthly cash demand, but we do have enough cash to last for at least the next 9 months and so far we havent had to lay off any staff.