What is typically expected when a company is not considered a going concern?

When a company is not considered a going concern, it implies that the business is either unable or unlikely to continue its operations for the foreseeable future. In this context, the valuation of assets shifts from the historical cost method to a more realistic and market-based approach, specifically net realizable value.

Net realizable value is the amount that is expected to be received from the sale of an asset minus any costs associated with the sale. This approach is adopted because, if the company is winding down, the assets will not be held for long-term use and their recoverable amounts may be less than their original cost. By calculating assets at net realizable value, stakeholders receive a more accurate picture of what the liquidation of assets would yield, reflecting the company’s current financial situation more accurately than historical cost would.

In contrast, recording assets at their historical cost would not only misrepresent the assets' values in this scenario but also potentially mislead investors and creditors regarding the company's financial health. Additionally, it's important to note that while not all debts must automatically be written off, they will need to be addressed in the context of the winding-down process, and simply ignoring financial statements would not provide clarity on the company’s obligations and status.