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Journal entry — Liquidation basis of accounting — FASB exposure draft imminent

Published on: Feb 16, 2012

At its meeting yesterday, the FASB reaffirmed its previous tentative decision that the liquidation basis of accounting should be applied to financial statements when liquidation is imminent. Liquidation could be considered imminent if (1) the governing body of the entity approved a plan to liquidate or (2) other forces require an entity to liquidate and there is a remote likelihood that the entity will become a going concern in the future. In addition, the Board reaffirmed its tentative decision that items presented on a liquidation basis in an entity’s financial statements should reflect the amount of cash that the entity expects to collect or pay during the liquidation.

The FASB expects to issue a proposed ASU for comment.

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