By Norb Dietrich, CPA
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-15 – Disclosure of Uncertainty about an Entity’s Ability to Continue as a Going Concern. Prior to adopting and issuing this update, generally accepted accounting principles (GAAP) did not contain any authoritative guidance as to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosure. This pronouncement effectively shifts this responsibility from generally accepted auditing standard (GAAS) promulgated by the American Institute of Certified Public Accountants (AICPA) to GAAP.
Under existing GAAS literature, if circumstances warrant, an auditor is required to assess an entity’s ability to continue as a going concern for a period of one year from the date of the financial statements being audited. Under the new guidance, management will be required to evaluate whether or not there is substantial doubt about an entity’s ability to continue as a going concern. Substantial doubt 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 will be issued or within one year after the date that the financial statements are available to be issued.
The statement applies to all entities. The statement is effective for annual periods ending after December 15, 2016. Early application is permitted.
Volume 1, Issue 4