Under what conditions does substantial doubt exist concerning an entity's ability to continue as a going concern?

Substantial doubt regarding an entity's ability to continue as a going concern arises primarily when it is probable that the entity will not be able to meet its financial obligations as they come due. This assessment is critical for financial reporting, as it impacts how financial statements are prepared and presented.

In the context of financial accounting, the going concern assumption presumes that an entity will continue to operate for the foreseeable future, typically defined as at least one year from the date of the financial statements. Substantial doubt about this assumption signals potential liquidity issues or financial distress.

When an entity faces conditions such as ongoing losses, difficulty in obtaining financing, or other indicators of financial instability, it leads to this doubt. Hence, if it is probable that the entity cannot meet its obligations, this situation firmly establishes the existence of substantial doubt concerning its going concern status.

High profits, increasing revenue, and a situation where assets exceed liabilities generally indicate financial health and stability. As such, these conditions would not typically contribute to doubts about the entity's ability to continue its operations.