OUR THOUGHTS ON:

FASB Continues to Deliberate Going-Concern Project

Audit

By Kurt Herdman

At its meeting on November 6, 2013, the FASB has decided to continue with the deliberations on the Proposed Accounting Standard's Update, Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity's Going Concern Presumption. So what does this mean to you and your organization?

Currently, under U.S. Generally Accepted Accounting Principles (GAAP), there is no guidance relative to management's responsibilities in evaluating or disclosing going- concern uncertainties. Instead, in current GAAP there is an inherent presumption that an entity will be able to continue as a going concern, as this establishes the fundamental basis for measuring and classifying assets and liabilities. As a result, there are a number of inconsistencies in financial reporting practices surrounding going concern.

Up to this point, it has been the audit profession through U.S. Generally Accepted Auditing Standards (GAAS) that has led the charge in evaluating an organization's ability to continue as a going concern. GAAS also requires auditors to evaluate the financial statements, in that the financial statements and related disclosures reflect the relevant facts and circumstances surrounding any conclusion on an entity's ability to continue as a going concern.

Ultimately, the proposed guidance from the FASB will require management to make similar assessments as outlined under GAAS, by requiring management to perform going-concern evaluations, prescribe guidance for starting disclosures surrounding going concern, requiring a going-concern assessment period of 24 months after the financial statement date, and providing a threshold for SEC filers to determine whether there is substantial doubt about an organization's ability to continue as a going concern. The next project meetings on the topic will take place in January 2014.

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