Financial Reporting-Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
Auditing standards have long required an auditor to evaluate whether there is a substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time as well as requiring certain reporting and footnote disclosures. In response to diversity in practice, as well as the lack of authoritative guidance from a financial reporting standpoint, the Financial Accounting Standards Board (FASB) has recently issued ASU 2014-15.
The main provisions of ASU 2014-15 include:
- “Substantial doubt” exists when the aggregate relevant condition and events indicate it is “probable” the entity will be unable to meet its obligations as they become due…
- …for a period of one year from the financial statements issuance date
- “Probable” is used consistently with its use in FASB Codification Top 450. Contingencies
- Disclosures are required when there is a substantial doubt or when substantial doubt is alleviated by management plans
Effective Date: Annual reporting periods beginning after December 15, 2016 with early application permitted.
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