IDW PS 270: How to Apply Going Concern Requirements Under German Audit Standards

You're reviewing the draft financial statements of a mid-sized GmbH. Equity has been negative for two quarters, and the Geschäftsführer tells you a new credit line is “almost finalised.” Under IDW PS 270, you can't take that at face value. The standard requires you to assess the entity's ability to continue as a going concern for a minimum of twelve months from the balance sheet date (Abschlussstichtag), and the InsO adds its own forecast periods on top of that.

IDW PS 270 n.F. requires the Wirtschaftsprüfer to evaluate management's going concern assessment under § 252 Abs. 1 Nr. 2 HGB, apply one of four scenarios depending on the severity of identified events and conditions, and report material uncertainties (wesentliche Unsicherheiten) in a dedicated section of the Bestätigungsvermerk under § 322 Abs. 2 Satz 3 HGB.

What § 252 Abs. 1 Nr. 2 HGB actually requires from management

The going concern presumption in German law sits in § 252 Abs. 1 Nr. 2 HGB. It states that assets and liabilities must be valued on the assumption that the entity will continue as a going concern, unless factual or legal circumstances prevent this (tatsächliche oder rechtliche Gegebenheiten). This is a rebuttable presumption, and the burden of evidence shifts depending on the entity's financial condition.

For entities that have a history of sustained profits and ready access to financial resources, IDW PS 270 n.F. A.8 allows both management and the auditor to accept the going concern presumption without a detailed analysis. That's the easy case. The difficult case (and the one that generates findings) is where indicators exist but management has not prepared a formal Fortführungsprognose.

Under the BGH ruling IX ZR 285/14, the legal representatives of a GmbH have an affirmative obligation to prepare a continuation forecast when circumstances cast doubt on the entity's ability to continue. The auditor's job under IDW PS 270 is to evaluate whether that forecast is reasonable, not to prepare one.

§ 252 Abs. 1 Nr. 2 HGB does not specify a forecast period. The standard itself requires a minimum of twelve months from the balance sheet date. But German insolvency law imposes additional, longer periods that the auditor cannot ignore.

The four IDW PS 270 scenarios and how to classify your engagement

IDW PS 270 n.F. structures the auditor's response into four scenarios. Each scenario produces a different outcome in the audit file and in the Bestätigungsvermerk.

Scenario 1: No doubt

Scenario 1 applies when no events or conditions exist that cast doubt on the entity's ability to continue. The going concern presumption holds. No additional disclosure in the notes is required, and the Bestätigungsvermerk contains no special section. The file should still document that the auditor considered going concern (a one-paragraph memo is sufficient), because the absence of evidence is itself a conclusion that needs a record.

Scenario 2: Events exist, but no material uncertainty

Scenario 2 applies when events or conditions exist, but after evaluation they do not constitute a material uncertainty. Typical examples: a key customer loss that reduces revenue by 8% but the entity has sufficient reserves, or a covenant breach that management has already renegotiated with the bank. The auditor documents the events, the evaluation, and the conclusion. No dedicated section in the Bestätigungsvermerk is required, but the auditor should consider whether the events warrant an Emphasis of Matter paragraph under IDW PS 406.

Scenario 3: Material uncertainty exists

Scenario 3 is where most files get into trouble. Events and conditions exist that constitute a material uncertainty (wesentliche Unsicherheit) in connection with the entity's ability to continue as a going concern. The going concern basis of accounting is still appropriate (the entity can still prepare financial statements at going concern values), but a genuine uncertainty exists about whether the entity will survive the forecast period.

IDW PS 270 n.F. para. 29 requires a dedicated section in the Bestätigungsvermerk with the heading “Wesentliche Unsicherheit im Zusammenhang mit der Fortführung der Unternehmenstätigkeit.” The entity must also disclose the material uncertainty in the Anhang (or, for entities without notes, below the balance sheet per IDW PS 270). If the entity has a Lagebericht, the reference to the going concern risk must appear there too, with an explicit cross-reference to the Anhang disclosure.

Scenario 4: Going concern basis inappropriate

Scenario 4 applies when the going concern basis of accounting is inappropriate. The entity should be preparing financial statements at liquidation values (Liquidationswerte). If management refuses to do so, the auditor issues a Versagungsvermerk (disclaimer of opinion). This is rare in practice but the file documentation must show that the auditor reached this conclusion through a structured evaluation, not a judgment call made in the signing meeting.

InsO forecast periods and why they catch auditors off guard

German insolvency law creates obligations for the entity's management that sit alongside (and sometimes extend beyond) the IDW PS 270 assessment period. The Wirtschaftsprüfer cannot ignore them because the InsO forecast periods directly affect whether the going concern presumption under § 252 HGB holds.

Following the SanInsFoG reforms effective January 2021, the InsO codified specific forecast periods for the first time. Previously, these periods were set by case law and the IDW's own pronouncements (primarily IDW S 11). The current position is:

• § 19 InsO requires a 12-month forecast for Überschuldung (balance sheet insolvency). If the entity's liabilities exceed its assets and the Fortbestehensprognose for the next twelve months is negative, management must file for insolvency within six weeks.
• § 18 InsO requires a 24-month forecast for drohende Zahlungsunfähigkeit (imminent illiquidity). This is a voluntary filing ground, but the 24-month horizon is what courts will use to evaluate whether management acted in time.

For the Wirtschaftsprüfer, this means the IDW PS 270 minimum of twelve months from the balance sheet date may be insufficient. If the entity is showing indicators of potential Überschuldung, the auditor should evaluate whether management's forecast covers the full twelve months from the balance sheet date (at minimum) and, separately, whether management has assessed drohende Zahlungsunfähigkeit over 24 months.

IDW PS 270 n.F. does not explicitly require the auditor to apply the 24-month InsO period, but the IDW's own FAQ on forecast periods (published July 2021) makes clear that the auditor must consider the InsO timeframes when evaluating management's assessment.

What goes in the Bestätigungsvermerk for each scenario

The Bestätigungsvermerk (auditor's report) under § 322 HGB has specific requirements for going concern reporting that go beyond what ISA 570 requires in an English-language audit report.

For Scenario 1 and Scenario 2, no dedicated going concern section is required. The auditor's responsibilities section of the Bestätigungsvermerk already contains standard language about going concern under the IDW PS 400 series templates.

For Scenario 3, IDW PS 270 n.F. para. 29 requires a separate section with the heading “Wesentliche Unsicherheit im Zusammenhang mit der Fortführung der Unternehmenstätigkeit.” This section must:

• Draw attention to the note in the financial statements where the material uncertainty is disclosed
• State that these events or conditions indicate a material uncertainty that may cast significant doubt on the entity's ability to continue
• Confirm that the auditor's opinion is not modified in respect of this matter

§ 322 Abs. 2 Satz 3 HGB provides the legal basis: the Bestätigungsvermerk must include a reference to risks threatening the entity's continued existence (bestandsgefährdende Risiken). The practical effect is that Scenario 3 produces an unmodified opinion with a material uncertainty section, not a qualified opinion.

For Scenario 4, the Bestätigungsvermerk becomes a Versagungsvermerk. IDW PS 270 n.F. para. 34 requires the auditor to disclaim the opinion if management has prepared financial statements on a going concern basis when liquidation values would be appropriate. IDW PS 405 governs the mechanics of the disclaimer.

Worked example: Müller Fertigung GmbH

Client profile: Müller Fertigung GmbH, a precision metal fabrication company based in Solingen, North Rhine-Westphalia. Revenue: €28M. The entity reports under HGB. Equity at year-end: negative €1.2M. The entity's main bank loan (€6M) matures in nine months. Management has verbal confirmation of a refinancing but no signed term sheet.

Step 1: Identify events and conditions

The auditor identifies two indicators under IDW PS 270 n.F. A.3: negative equity (a financial indicator) and a loan maturity within the forecast period without confirmed refinancing (a financial indicator). A third indicator (loss of a contract representing 15% of revenue, effective in eight months) is identified from management's board minutes.

Documentation note: Record each indicator with its source document. Cross-reference to IDW PS 270 n.F. A.3 for the indicator classification. Date the identification.

Step 2: Evaluate management's assessment

Management has prepared a cash flow forecast covering fourteen months from the balance sheet date. The forecast assumes the bank refinancing closes on existing terms and the lost contract is replaced by two smaller contracts already in negotiation. The auditor obtains the cash flow model and stress-tests it by removing the replacement contracts entirely.

Documentation note: Record the assumptions tested, the stress scenario applied, and the outcome. If the entity survives the stress scenario, record the margin of safety. If it does not, record the cash shortfall month.

Step 3: Assess the InsO position

With negative equity of €1.2M, the auditor must consider whether Überschuldung exists under § 19 InsO. Management has prepared a Fortbestehensprognose (going concern forecast) covering twelve months. The forecast is positive under the base case but negative under the stress case (no replacement contracts and no refinancing).

The auditor also considers whether a 24-month assessment for drohende Zahlungsunfähigkeit under § 18 InsO is warranted. Given the refinancing uncertainty, the auditor requests that management extend the cash flow forecast to 24 months.

Documentation note: Record the InsO analysis separately from the IDW PS 270 assessment. State which InsO ground was considered (§ 18 or § 19 or both), the forecast period applied, and the conclusion.

Step 4: Classify the scenario

Under the base case, the entity continues as a going concern. Under the stress case, it does not survive past month eleven. The refinancing is probable but not certain. The replacement contracts are possible but speculative. The auditor concludes that a material uncertainty exists (Scenario 3). The going concern basis of accounting remains appropriate because the base case is more likely than the stress case, but the uncertainty is real and its potential impact is material.

Documentation note: State the scenario classification, the reasoning, and the key judgment. Identify what would change the classification (e.g., signed term sheet from the bank would move this to Scenario 2).

Step 5: Reporting

The auditor confirms that management has included an adequate disclosure in the Anhang describing the negative equity, the refinancing uncertainty, and the contract loss. The Bestätigungsvermerk includes a “Wesentliche Unsicherheit im Zusammenhang mit der Fortführung der Unternehmenstätigkeit” section referencing the Anhang note. The opinion is unmodified.

Documentation note: Cross-reference the Bestätigungsvermerk wording to the Anhang note number. Confirm that § 322 Abs. 2 Satz 3 HGB has been satisfied.

The file now contains: a going concern memo with the four-step evaluation, the cash flow model with stress tests, the InsO analysis, the Anhang disclosure review, and the Bestätigungsvermerk with the dedicated section. A WPK reviewer opening this file can trace the logic from indicator identification through to the report.

Practical checklist for your next German going concern file

1. Confirm that management has prepared a Fortführungsprognose covering at least twelve months from the Abschlussstichtag. If management's forecast is shorter, request an extension before proceeding (IDW PS 270 n.F. para. 12).
2. Check whether InsO grounds apply. If negative equity exists, assess whether a 12-month Überschuldungsprüfung under § 19 InsO has been prepared. If drohende Zahlungsunfähigkeit indicators exist, request a 24-month cash flow forecast under § 18 InsO.
3. Classify the engagement into one of the four IDW PS 270 scenarios. Document the classification and the judgment supporting it. State what evidence would change the classification.
4. For Scenario 3: verify that the Anhang disclosure names the specific events and conditions, describes the material uncertainty, and is not buried in a generic risk section.
5. For Scenario 3: draft the “Wesentliche Unsicherheit” section of the Bestätigungsvermerk before the signing meeting, not during it.
6. For all scenarios: document the going concern conclusion in a standalone memo, even for Scenario 1. The memo should take no more than one page for Scenario 1, but it must exist.

Common mistakes WPK reviewers flag

• The WPK's quality assurance reviews (conducted every six years under § 57a WPO) frequently identify files where the auditor accepted management's verbal assurances about refinancing without obtaining corroborating evidence. IDW PS 270 n.F. para. 16 requires the auditor to evaluate the feasibility of management's plans, not just their existence.
• The WPK's published financial statement reviews have flagged cases where the Bestätigungsvermerk contained no material uncertainty section despite the entity having negative equity and a loan maturity within the forecast period. The most common cause: the engagement team classified the situation as Scenario 2 without documenting why the uncertainty was not “material.”
• Firms using ISA-based templates for German statutory audits sometimes omit the § 322 Abs. 2 Satz 3 HGB reference to bestandsgefährdende Risiken. The Bestätigungsvermerk has specific HGB requirements that ISA 570 report templates do not cover.

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Further reading and source references

• IDW PS 270 n.F.: the authoritative German standard for the auditor's evaluation of the going concern assumption.
• § 252 Abs. 1 Nr. 2 HGB: the statutory going concern presumption in German commercial law.
• InsO §§ 17–19: the German insolvency grounds and their associated forecast periods, as amended by SanInsFoG (January 2021).
• IDW S 11: the IDW standard on the assessment of the existence of insolvency grounds.
• ISA 570 (Revised): the international going concern standard that IDW PS 270 adapts for the German context.
• § 322 HGB: the statutory requirements for the Bestätigungsvermerk, including § 322 Abs. 2 Satz 3 on bestandsgefährdende Risiken.