Going Concern Value

Also found in: Financial, Acronyms.

Going Concern Value

The value inherent in an active, established company as opposed to a firm that is not yet established.

The value of the assets of a business considered as an operating whole.

As a component of business value, going concern value recognizes the many advantages that an existing business has over a new business, such as avoidance of start-up costs and improved operating efficiency. In this sense, the going concern value of a firm represents the difference between the value of an established firm and the value of a start-up firm.Going concern value also indicates the value of a firm as an operating, active whole, rather than merely as distinct items of property. U.S. Bankruptcy law, for example, has recognized the need to preserve going concern value when reorganizing businesses in order to maximize recoveries by creditors and shareholders (11 U.S.C.A. § 1101 et seq.). Bankruptcy laws seek to preserve going concern value whenever possible by promoting the reorganization, as opposed to the liquidation, of businesses.

Going concern value also implies a firm's ability to generate income without interruption, even when ownership has changed (Butler v. Butler, 541 Pa. 364, 663 A.2d 148 [Pa. 1995]).

Going concern value is distinguished from the concept of good will, which refers to the excess value of a business that arises from the favorable disposition of its customers. Good will may include the value of such business elements as trade names, trade brands, and established location.

Further readings

Bernstein, Donald S., and Nancy L. Sanborn. 1993. The Going Concern in Chapter 11. New York: Practising Law Institute.

Oswald, Lynda J. 1991."Goodwill and Going-Concern Value: Emerging Factors in the Just Compensation Equation." Boston College Law Review 32 (March).

References in periodicals archive ?
The concepts of going concern value and liquidation value also can lead to interesting predicaments.
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The Delaware courts can therefore comfortably dispense with resorting to the financially unsupported concept that liquid and informed share markets systematically understate going concern value.
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We partition the total cost of liquidation into two components: the destruction of going concern value (enterprise loss), and the direct expense generated by a complete divestiture of assets.
It should be noted that the intangibles of goodwill or going concern value of a business are not of like kind to the goodwill or going concern value of another business under Regs.
FOR APPRAISERS, BOTH INDIVIDUALLY AND COLLECTIVELY, the issue of how to handle going concern value has been a recurring challenge in their professional lives.
1031(a)-2(c)(2), the goodwill and going concern value of a business is not of a like kind to the goodwill and going concern value of another business.
Because the terms business enterprise, business enterprise value, going concern, going concern value, and goodwill are so confounded, new terms were coined coincident with developing the Appraisal Institute's Course 800.