Project Updates
Going Concern
Last Updated: September 9, 2008 (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
*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.
*Decisions Reached at Last Meeting
At the August 27, 2008 meeting, the Board made the following decisions with respect to the going concern guidance:
- The guidance should converge with IAS 1, Presentation of Financial Statements, and IAS 10, Events after the Balance Sheet Date, supplemented by disclosure requirements in AICPA Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures, AU Section 341, “The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern.”
- The guidance should converge with IAS literature with respect to the time horizon for the going concern assessment.
To provide appropriate visibility to this new guidance for constituents, the Board decided to issue this guidance as a new standard, preceded by an Exposure Draft and comment period. The Board agreed upon a 60-day comment period. The new standard will be effective for financial statements issued after the codification is ratified.
*Summary of Decisions Reached to Date (As of 9/9/08)
See decisions above.
Also, the Board has decided not to address the liquidation basis of accounting as part of this project.
*Next Steps
The Board directed the staff to proceed to a draft of a proposed Statement for vote by written ballot.
*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 Statement, Interpretation, FSP, or Statement 133 Implementation Issue.
The following are links to the minutes for each meeting.
| *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
Sean Prince
FASB Postgraduate Technical Assistant
scprince@fasb.org
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