News & Events

New Guidance on Evaluating Whether or Not a Going Concern Exists

Recently, FASB issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern.  This ASU changed accounting principles generally accepted in the United States of America (U.S. GAAP) by adding the guidance to enable management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures.   Previously, the guidance on evaluating a potential going concern issue, as well as providing relevant financial statement disclosures, was documented only within the auditing standards and federal securities law.  This ASU is finally providing that guidance to management, the party responsible for preparing the financial statements in accordance with U.S. GAAP.

ASU 2014-15 requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.  The ASU provides guidance on how management should make this determination as well as whether management’s plans are considered to mitigate those conditions/events or alleviate them.  The ASU specifies required disclosures for when substantial doubt is raised and is alleviated, as well as when substantial doubt is raised and not alleviated.

This ASU is applicable to all entities and is effective for annual periods ending after December 15, 2016 (early application is permitted).

For questions or for more information, please contact Linda M. Pearson at 401-752-0566 or lpearson@sansiveri.com.