Going Concern Value

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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 nine contributions examine how Lehman Brothers' derivatives portfolio would have worked out under Dodd-Frank, evaluate the costs and benefits of automatic stays for derivatives and repurchase agreements, and analyze the ability of modified bankruptcy laws to preserve a financial firm's going-concern value.
Its services are intended to allow distressed businesses to remain intact in order to maintain their going-concern value, which is typically significantly higher than their liquidation value.
Alvin Mobley, III, in his October 1997 article, "Defining and Allocating Going-Concern Value Components.
1031(a)-2(c)(2), a business's goodwill or going-concern value is not eligible for a section 1031 exchange because it is unique to that business and therefore cannot be said to be like that of another business.
In contrast, most of the recent upgrades reflect improvements in companies' going-concern value, it said.
Hughes said that this was an example where the break-up value was higher than the going-concern value.
The goal is to permit debtors' going-concern value to be preserved and shared equitably among both existing creditors and future claimants, instead of being dismembered in a Chapter 7 "fire sale" liquidation with current creditors receiving far less and future claimants receiving nothing.
even if firms could be sold for their full going-concern value.
After thorough due diligence, the candy company bought out the failing company at a fraction of the going-concern value, eliminating the competition and then doubling its own asset base.
The going-concern value of assets may also overstate the true value of the firm, since it assumes that a complete asset sale would incur no liquidation costs whatsoever.
1031(a)-2(c)(2) provides that goodwill and going-concern value of dissimilar businesses are not of a like kind and, further, that goodwill and going-concern value of similar businesses are of like kind only in rare and unusual circumstances.