The Financial Accounting Standards Board (FASB) has announced that management will not be required to disclose a going concern if there is substantial doubt about an entity’s ability to continue. The board decided that users of financial statements would be better served with ongoing disclosures about risks and uncertainties, rather than a disclosure made only after management finds there is doubt about the entity’s future viability.
FASB first opened the issue with a Proposed Statement of Financial Accounting Standards, Going Concern, on October 9, 2008. The proposal would have required an entity’s management to consider all available information about the future, which was defined as at least 12 months from the end of the reporting period.
FASB received comments from 29 respondents, the majority of which generally supported the proposal. However, some respondents questioned the wording of “all available information” as being too broad. In addition, several respondents were concerned with the amount of the time and resources an entity would need to devote to properly determine its own viability over a 12-month period.
Currently, the U.S. standard guidance on going concern is provided by the American Institute of CPAs (AICPA). The AICPA’s Statement on Auditing Standards (SAS) no. 59 says that an auditor is responsible for determining going concern during a financial statement audit, with a reasonable period for a company’s viability being not more than one year beyond the date of the financial statements being prepared.
FASB has also determined that an entity should prepare financial statements on the going-concern basis until a plan of liquidation is approved by the owners or is imposed by an outside entity.
For more on the FASB’s announcement, please see the Journal of Accountancy.
FASB first opened the issue with a Proposed Statement of Financial Accounting Standards, Going Concern, on October 9, 2008. The proposal would have required an entity’s management to consider all available information about the future, which was defined as at least 12 months from the end of the reporting period.
FASB received comments from 29 respondents, the majority of which generally supported the proposal. However, some respondents questioned the wording of “all available information” as being too broad. In addition, several respondents were concerned with the amount of the time and resources an entity would need to devote to properly determine its own viability over a 12-month period.
Currently, the U.S. standard guidance on going concern is provided by the American Institute of CPAs (AICPA). The AICPA’s Statement on Auditing Standards (SAS) no. 59 says that an auditor is responsible for determining going concern during a financial statement audit, with a reasonable period for a company’s viability being not more than one year beyond the date of the financial statements being prepared.
FASB has also determined that an entity should prepare financial statements on the going-concern basis until a plan of liquidation is approved by the owners or is imposed by an outside entity.
For more on the FASB’s announcement, please see the Journal of Accountancy.
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