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The auditor has clearly stated that it has doubts about the company as a 'going concern'. This is a technical term in auditing that implies the auditor has doub

by npalli 11y ago

The auditor has clearly stated that it has doubts about the company as a 'going concern'. This is a technical term in auditing that implies the auditor has doubts that the company will survive (i.e, will have to liquidate) another twelve months. It's not a willy nilly "growing company is losing money" type statement, it means there is a fundamental problem in how the company is financed and operated. https://en.wikipedia.org/wiki/Going_concern https://en.wikipedia.org/wiki/Going_concern

rgbrenner 11y ago
By reducing the statement to that, you're overstating what the auditor actually said: KPMG said in the report that the need for more investment represented “a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.” And again, this was in their 2014 report. So clearly they've last more than a year at this point.
4ndr3vv 11y ago
I think you've misinterpreted this From your link: "This accounting principle assumes that, a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future."
- reitzensteinm 11y ago
  You've missed a negation.
taylorwc 11y ago
Auditors are required to issue such statements when there is no line of sight to the company being solvent (and no one can guarantee that the company can close a financing round.) I'd venture a guess that almost every startup at a similar stage to SoundCloud would have the same issue if they are audited.
- TheLogothete 11y ago
  Soundcloud is almost 10 years old. At what point a company stops being a startup? At what point it stops being feasible for a company to operate at a loss?
  - taylorwc 11y ago
    Are these meant to be rhetorical? You decide when you're going to stop calling it a startup. They are venture-backed and founded within the past decade. I'm going to call them a startup. As for question number two, I'll let you count how many publicly-traded companies aren't profitable that have been around for decades. I didn't register an opinion on whether SoundCloud should or shouldn't be profitable, I merely said what GAAS[0] requires an auditor to do. [0] http://pcaobus.org/Standards/Auditing/Pages/AU341.aspx http://pcaobus.org/Standards/Auditing/Pages/AU341.aspx
    - sosborn 11y ago
      There is operating at a loss because you are reinvesting (see: Amazon) and there is operating at a loss because your business isn't viable. Soundcloud is somewhere in between those two extremes.
      - taylorwc 11y ago
        Very true--Amazon would never have a going concern statement issued in its audit, because it voluntarily reinvests what would otherwise be operating profit. I was thinking more along the lines of a company like Sprint, where they are only solvent through issuance of debt and outside investment.
dopamean 11y ago
I'm sure the same would have been said about Facebook, Instagram, Twitter, and a billion other startups that eventually made it. Aren't auditors supposed to be very conservative? It's unsurprising to me that KPM, PWC, or any other auditing firm would have a pessimistic out look of a startup that is relying on raising money to exist.

by npalli 11y ago

rgbrenner 11y ago

By reducing the statement to that, you're overstating what the auditor actually said: KPMG said in the report that the need for more investment represented “a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.” And again, this was in their 2014 report. So clearly they've last more than a year at this point.

4ndr3vv 11y ago

I think you've misinterpreted this From your link: "This accounting principle assumes that, a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future."

reitzensteinm 11y ago
You've missed a negation.

taylorwc 11y ago

Auditors are required to issue such statements when there is no line of sight to the company being solvent (and no one can guarantee that the company can close a financing round.) I'd venture a guess that almost every startup at a similar stage to SoundCloud would have the same issue if they are audited.

TheLogothete 11y ago
Soundcloud is almost 10 years old. At what point a company stops being a startup? At what point it stops being feasible for a company to operate at a loss?
- taylorwc 11y ago
  Are these meant to be rhetorical? You decide when you're going to stop calling it a startup. They are venture-backed and founded within the past decade. I'm going to call them a startup. As for question number two, I'll let you count how many publicly-traded companies aren't profitable that have been around for decades. I didn't register an opinion on whether SoundCloud should or shouldn't be profitable, I merely said what GAAS[0] requires an auditor to do. [0] http://pcaobus.org/Standards/Auditing/Pages/AU341.aspx http://pcaobus.org/Standards/Auditing/Pages/AU341.aspx
  - sosborn 11y ago
    There is operating at a loss because you are reinvesting (see: Amazon) and there is operating at a loss because your business isn't viable. Soundcloud is somewhere in between those two extremes.
    - taylorwc 11y ago
      Very true--Amazon would never have a going concern statement issued in its audit, because it voluntarily reinvests what would otherwise be operating profit. I was thinking more along the lines of a company like Sprint, where they are only solvent through issuance of debt and outside investment.

dopamean 11y ago

I'm sure the same would have been said about Facebook, Instagram, Twitter, and a billion other startups that eventually made it. Aren't auditors supposed to be very conservative? It's unsurprising to me that KPM, PWC, or any other auditing firm would have a pessimistic out look of a startup that is relying on raising money to exist.