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Going Concern Vs Wind Up

R

Rahul

Keen member
Chapter: Profit Reporting

Line - "While measures of solvency might be concerned with a wind-up event, measures of profit are more likely to assume that the company is a going concern, ie it will continue to sell new business."

Ques 1: Why is Solvency measured on the assumption that company is winding up instead of going concern?
Ques 2: Why is profit not measured consistently as Solvency is measured.?
 
Be careful with how you are reading the text. The Core Reading only states that a solvency assessment might be based on wind-up, not that it will. For example, a regulator might want to check that the insurer is able to meet its obligations to existing policyholders without relying on continuing to write new business in order to achieve that.

Reporting on solvency (eg to regulator) is typically separate from reporting on profits (statutory accounts), having different purposes.
 
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