Going Concern
Before too much attention is placed on the new Accounting Standards Update issued earlier this year, it is important to remain cognizant of the updates from 2014 that have not yet taken effect. Annual periods beginning after December 15, 2016, will be subject to certain disclosures regarding going concern in accordance with FASB ASU 2014–15.
Under this update, management must annually assess whether there is substantial doubt concerning the entities’ ability to continue as a going concern within one year of the issuance date. Conditions that are known, and are reasonably knowable, must be considered in this assessment. Substantial doubt exists if it is unlikely that an entity will be able to meet obligations within one year of the issuance date.
If substantial doubt exists and there are no plans to alleviate, then certain disclosures must be made. A statement will need to indicate that there is substantial doubt with regards to the entities’ ability to continue as a going concern within one year of the issuance date. Disclosure relating to the assessment that substantial doubt exists and the conditions which gave rise to substantial doubt must be disclosed, as well as any plans to mitigate the substantial doubt.
If it is felt that the substantial doubt will be alleviated by management’s plans, then disclosure relating to the assessment that substantial doubt exists and the conditions which gave rise to substantial doubt still must be disclosed; as well as disclosure on management’s plans to alleviate the substantial doubt assessment.
