Back in August 2014, Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern was issued by the Financial Accounting Standards Board (FASB). The standard establishes management's responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern and provides related footnote disclosures under US generally accepted accounting principles (GAAP). Going concern guidance was not officially codified under US GAAP prior to issuance of No. 2014-15. The standard is effective for years ending after Dec. 15, 2016 with early adoption permitted.
The required time period for evaluating conditions that may raise substantial doubt about an entity's ability to continue as a going concern is one of the most significant changes included in the new guidance and requires consideration within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Under current auditing standards, consideration ends one year from the date of the financial statements being audited.
GAAP requires financial statement disclosures for the following:
The standard defines substantial doubt as the following, "substantial doubt about an entity's ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or within one year after the date that the financial statement are available to be issued when applicable.) The term probable is defined as "the future event or events are likely to occur."
Wednesday, April 24, 2019 | 7:30 AM – 9:30 AM EDT | The Hartford Club