Financial Reporting-Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

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.

For questions or additional information, contact brent@brookslodden.com.