The non-adoption of Bangalore Turf Club`s accounts at the AGM has brought an important accounting issue into the spotlight. A member`s objection over the club`s going-concern status has raised questions about asset valuation, financial implications and the institution`s future. With the auditors flagging uncertainty and the managing committee defending its position, what does `not a going concern` actually mean for BTC and its members?

An objection at the AGM over the club`s going-concern status prevented the adoption of its accounts, bringing an unfamiliar accounting expression into the spotlight. What exactly does it mean, why has it become an issue for BTC, and what are the implications for the club and its members?

The Bangalore Turf Club`s Annual General Meeting witnessed an unusual development when a member, who is a practising chartered accountant, objected to the adoption of the accounts on the ground that the club could no longer be considered a going concern. The objection brought the meeting to a standstill on the question of adopting the financial statements and has raised several questions among members and the racing fraternity.

For many members and racegoers, the expression `going concern` may be unfamiliar. Yet it is an important accounting principle, and the objection raised at the AGM has implications that go beyond the routine approval of a balance sheet. It is therefore worth understanding what the expression means, why the auditors have raised the issue and what the consequences could be if an organisation is eventually found not to qualify as a going concern.

What is a going concern?

In simple terms, a going concern is an organisation that is expected to continue functioning for the foreseeable future. Its accounts are prepared on the assumption that it will carry on its activities, meet its financial obligations and will not be forced to close down or liquidate its assets.

For example, consider a company owning buildings, machinery, equipment and other assets. If it is expected to continue operating, these assets are valued and accounted for on the basis that they will remain available for use in its business. But if the company is shutting down, the situation changes. Its assets may have to be assessed on the basis of what can actually be realised through sale or disposal, while its liabilities may also require reassessment.

That is the significance of the going-concern principle. It determines the basis on which financial statements are prepared. A business facing difficulties does not automatically become a non-going concern. There must be a proper assessment of whether it can reasonably continue operating.

Why has this become an issue for BTC?

The auditors, in their report for the financial year ended March 31, 2026, have drawn attention to the expiry of the land lease and the subsequent Karnataka High Court order directing BTC to vacate and hand over the premises to the State Government by September 22, 2010.

The matter is pending before the Supreme Court, and the final outcome is awaited. The auditors have therefore observed that there is significant uncertainty about the club`s ability to continue as a going concern, realise its assets and discharge its liabilities.

They have also pointed out that the financial statements do not disclose the adjustments that might become necessary concerning the recoverability of assets and the quantification of liabilities if the club is unable to continue as a going concern.

Their concluding observation is particularly important. They state that they are unable to express an opinion on the club`s going-concern assumption and its impact on the financial statements.

Have the auditors declared BTC a non-going concern?

No. This distinction is important.

The auditors have identified what is termed a `Material Uncertainty Related to Going Concern`. They have not declared that BTC is no longer a going concern. Nor have they directed the club to write off its assets.

What they are saying is that the unresolved land dispute creates considerable uncertainty about the club`s future, and they are unable to give an opinion on whether the going-concern assumption adopted in the accounts is appropriate.

In other words, they have drawn attention to a risk that could have a material impact on the financial statements, depending on the eventual outcome.

This is different from declaring that the club has no future or must close down.

What has the managing committee said?

The managing committee has addressed the auditors` observation in its report for the year ended March 31, 2026.

It points out that the Supreme Court, by its order dated March 25, 2015, granted leave in the matter, converting the Special Leave Petitions into Civil Appeal No. 3263 of 2015. The club remains hopeful of securing the necessary relief from the apex court and obtaining an extension of its tenure at the existing racecourse.

On this basis, the committee states that it does not envisage difficulty in continuing its racing activities and does not foresee any adverse situation that could materially affect the carrying value of its assets and liabilities or its future earning capacity. It consequently maintains that BTC qualifies as a going concern.

Thus, the auditors have expressed uncertainty, while the committee has maintained that the club qualifies as a going concern based on its expectation of obtaining relief from the Supreme Court.

Why did the member object to the accounts?

The objection appears to centre on the argument that, given the uncertainty surrounding the club`s future, the assets cannot continue to be carried in the books on the assumption that BTC will operate indefinitely at its present premises.

If the club is ultimately found not to be a going concern, the accounting treatment could change. The recoverable value of assets would have to be examined, and adjustments to their carrying values and liabilities might become necessary.

What happens if BTC is not considered a going concern?

This is where the implications become important.

If an organisation is genuinely unable to continue its operations, its accounts may have to be prepared on a basis other than going concern, sometimes referred to as a liquidation or break-up basis.

Assets may then have to be assessed at their realisable values rather than on the basis of their continued use. Liabilities and other financial obligations may also require reassessment.

What happens to BTC`s future if the Supreme Court rules against the club?

This is another aspect that enters the debate.

BTC has consistently maintained that the land was granted in perpetuity by the erstwhile Maharaja of Mysore for conducting horse racing and allied activities, and was not merely leased land as contended by the Government. The Supreme Court`s final verdict will determine the legal position.

If the judgment goes against the club, it would undoubtedly face a serious challenge in continuing racing at its existing premises. But would that necessarily mean the end of BTC as an institution?

The example of Madras Race Club is relevant. Despite losing its existing land for racing activities, the institution has continued to exist and explore alternative arrangements. The loss of a racecourse does not necessarily mean the organisation itself has ceased to have a future.

BTC also continues to admit new members. While this alone does not establish financial viability, it is another aspect of the club`s continuing institutional existence.

What does the non-adoption of accounts mean?

The objection raised at the AGM resulted in the accounts not being adopted. This is an important development, but its implications need to be understood correctly.

Non-adoption does not automatically invalidate the audited financial statements, nullify the auditor`s report or mean that the club must close down. It means that the general body has not approved the accounts. The management will have to consider the objection, examine the auditors` observations and take appropriate steps under the Companies Act, the club`s articles and applicable procedures.

The primary responsibility for assessing whether an organisation can continue as a going concern rests with its management. The auditors independently examine that assessment and whether the financial statements adequately reflect the risks involved.

The auditors` clarification, the management`s assessment and the objection raised by the member all need to be considered before the matter is resolved.

Issues beyond the balance sheet

An accounting question with implications beyond the balance sheet could not be answered at the AGM as none of the members of the Finance Committee were present and choosing to absent themselves

The issue raised at the AGM is not merely about whether a set of accounts should be approved. It touches upon the future of an institution that has been associated with horse racing in Bangalore for generations.

The club is facing a difficult situation. Its racing licence has been a matter of uncertainty, its land rights are before the Supreme Court, and its future operations require careful consideration. At the same time, the legal proceedings have not reached finality, and alternative possibilities for the continuation of racing remain to be explored.

Whether BTC qualifies as a going concern is ultimately an accounting assessment that must be supported by facts, financial projections and a realistic evaluation of its future. It should neither be based solely on the expectation of a favourable court verdict nor on the assumption that the worst possible outcome is inevitable.

For the members and the racing public, the important takeaway is that the auditors have flagged a material uncertainty, the committee has defended the going-concern assumption, and a member has challenged the adoption of the accounts on this basis. None of these developments, by itself, means that BTC has been declared a non-going concern.

These are questions that deserve a transparent and informed discussion rather than being lost in accounting terminology that only few members may fully understand.