What must management evaluate regarding a company's ability to continue as a going concern?

Management must evaluate substantial doubt regarding a company's ability to continue as a going concern primarily to ensure that the financial statements are prepared under the appropriate basis of accounting. This evaluation is critical because it determines whether the company can meet its obligations as they arise and continue operations for the foreseeable future, typically considered to be at least twelve months from the date the financial statements are issued.

In assessing going concern, management looks at various indicators that might raise doubts about the company's financial health, such as negative cash flows, defaults on loans, adverse key financial ratios, and other factors that may impact its operations. If substantial doubt exists, management may need to disclose this in the financial statements and consider potential solutions, such as restructuring debt, seeking additional financing, or implementing operational changes.

While historical performance, environmental sustainability, and market share expansion plans are important for various strategic reasons, they do not directly relate to the immediate concern of whether the company can continue operating and fulfilling its financial obligations in the near term. Thus, the evaluation of substantial doubt is a fundamental aspect of financial reporting and is essential for transparency and accuracy in conveying the company's financial position to stakeholders.