General Motors Corp. . normally known as GM. is an iconic American corporation. It was the world’s largest car maker from 1931 to 2008. GM was a victor in the car market until 2005. when it reported a net loss of more than $ 10 billion and continued to post one-year losingss since that clip. During 2005 to 2007. the stock monetary value slight increased until it disclosed its immense deferred revenue enhancement assets. Since so GM’s stock monetary value continued dropping and reached at a depression of $ 1. 45 per portion on March 6. 2009.

On March 4. 2009. Deloitte & A ; Touche issued an unqualified sentiment with a going-on concern paragraph on GM’s 2008 fiscal statements. GM received $ 13. 4 billion in authorities loans in December 2008 and has requested another $ 16. 6 billion. In April 2009. a restructuring program was created to salvage GM. On June 1. 2009. GM filed for Chapter 11 bankruptcy. A new GM. known as General Motors Co. . was created under the footings of bankruptcy program. General Motors Co. began its operations on July 10. 2009. In November 2010. GM went public with an initial public offering that raised $ 23. 1 billion. This clip. Deloitte did non do mention to going-on concern on GM’s 2010’s fiscal coverage. Discussion Questions

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1. From Exhibit 1. we can see that since 2005. GM is enduring from losingss and it had negative hard currency flows from operations except for 2007. In 2006. its entire assets shrank about 60 % from $ 476. 078 million to $ 186. 182 million. However. in my sentiment. 2005 is non the mark of GM’s impending fiscal hurt. It is in 2007 when it disclosed its immense deferred revenue enhancement assets. which made the stock monetary value dropped suddenly. And it is besides in 2007 when the company’s net losingss reached at $ 38. 732 million. The immense deferred revenue enhancement assets and changeless immense losingss make me see that GM may meet large fiscal hurt in the undermentioned old ages.

2. Hearers should see the undermentioned things in measuring possible going-on concern uncertainnesss. ( 1 ) Consideration of conditions and events such as negative tendencies of operating losingss. working capital lacks. negative hard currency flows. inauspicious cardinal fiscal ratios. ( 2 ) Consideration of management’s program such as programs to dispose assets. programs to borrow money or restructure debt. programs to cut down or detain outgos and programs to increase ownership equity. ( 3 ) Consideration of fiscal statement effects ; whether they are equal and what are the possible effects. ( 4 ) Consideration of the effects on the auditor’s studies.

3. In my sentiment. the going-concern uncertainness is non warranted. No 1 could foretell what will go on in the hereafter. Hearers do non hold the duty to foretell future events. Therefore. the going-concern uncertainness is merely a significant uncertainty based on historical informations and past events. some sensible estimations and management’s programs. From the exhibit 1. we can happen that GM suffered losingss since 2005. However. I do non believe it necessary to publish an audit sentiment modified to unwrap going-concern sentiment prior to 2007 when its losingss reached at $ 38. 732 million. A going-concern sentiment should be issue when significant uncertainty exists. Although it suffered losingss since 2005. there was no mark that direction would register the chapter 11 bankruptcy protection and it was likely that the US authorities would supply fiscal support for the GM. So it is non equal to add the going-concern paragraph in my point of position.

4. The Great Recession which began in December 2007 and lasted to September 2008 might hold accelerated Deloitte’s determination to publish an audit sentiment modified to unwrap going-concern uncertainnesss. The fiscal crisis resulted in prostration of big fiscal establishments. the bailout of Bankss by national authoritiess. downswings in stock markets around the universe. etc. The fiscal crisis made GM’s jobs more hard because it could non pay its debt and it became harder for it to refinance. Therefore. at this point. the going-concern uncertainness for GM was well increased. which led to an audit sentiment with modified going-concern paragraph.

5. The Car Allowance Rebate Program released on July 1. 2009 did assist the new GM. The plan provided inducements for the car industry with more than 690. 000 minutess rebated under this plan. Although GM’s sale were down 17 % from 2008. it got rid of 70 % debt. abandoned 4 unprofitable trade names and 13 fabrication workss. cut off 22. 500 employees and 2. 300 traders. These steps helped the new GM cut down its costs and got through its tough clip. And there was no mark that any going-on concern uncertainness existed. What hearers should see about the going-concern is reasonably much the same as in inquiry 2.

6. GM’s going-concern sentiment would slightly act upon my determinations sing buying a auto from GM or puting in GM’s stock. And this may be portion of the ground why GM’ stock dropped after 2008. In my point of position. going-concern is a self-fulfilling prognostication. However. it is non the going-concern sentiment caused the company to register a bankruptcy protection. The company’s job such as inefficient benefit program had been existed there for a long clip without work outing. The going-concern sentiment merely revealed the job and accelerated its death. And this finally made the self-fulfilling prognostication come true.

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