Project Update
Going Concern
Last Updated: October 21, 2009 (Updated sections are indicated with an asterisk *)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
Project Objective
Due Process Documents
*Decisions Reached at Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information
Project Objective
The objective of this project is to incorporate into FASB literature guidance on (1) the preparation of financial statements as a going concern and an entity’s responsibility to evaluate its ability to continue as a going concern and (2) disclosure requirements when financial statements are not prepared on a going concern basis and when there is substantial doubt as to an entity’s ability to continue as a going concern.
Due Process Documents
On October 9, 2008, the Board issued a proposed Statement, Going Concern, for a 60-day comment period. The comment period ended on December 8, 2008.
*Decisions Reached at Last Meeting (June 3, 2009)
See Minutes Below
*Summary of Decisions Reached to Date (As of 6/03/09)
The Board discussed issues raised in comments received on proposed FASB Statement, Going Concern. The Board decided the following:
- To provide guidance that defines a going concern
- To clarify that the time period for the going concern assessment is not a bright-line 12 months but also is not intended to be an indefinite look-forward period.
Further, the Board decided to broaden the scope of the project to address three additional areas:
- Enhancing the disclosures of short-term and long-term risks, specifically risks for which there is more-than-remote likelihood of occurrence
- Defining substantial doubt in terms of an entity's ability to continue as a going concern
- Defining when it is appropriate for an entity to apply the liquidation basis of accounting.
The Board will discuss the scope of the project and whether it will issue a revised Exposure Draft in the first quarter of 2010.
*Board/Other Public Meeting Dates
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
The following are links to the minutes for each meeting.
| *June 3, 2009 | Board Meeting—Analysis of Additional Constituent Outreach |
| February 18, 2009 | Board Meeting—Comment Letter Discussion |
| August 27, 2008 | Board Meeting—Codification Discussion |
| September 19, 2007 | Board Meeting—Removal from Board agenda |
| May 30, 2007 | Board Meeting—Add Project to Board agenda |
Background Information
The U.S. guidance for considering an entity’s ability to continue as a going concern is located in AICPA Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures, Section 341, "The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern," and states that the auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited. This evaluation is based on knowledge of relevant conditions and events obtained from the auditing procedures performed during a financial statement audit.
Constituents have expressed a need for accounting literature that clarifies that an entity has the primary responsibility for assessing its ability to continue as a going concern. The Board agrees that accounting guidance related to the going concern assumption should be directed specifically to entities because it is the entity that is responsible for preparing its financial statements and evaluating its ability to continue as a going concern. Accordingly, the Board concluded that guidance related to the going concern assumption should reside in the accounting literature established by the FASB and decided to undertake this project.
Contact Information
Patricia Donoghue
Project Manager
padonoghue@fasb.org