FASB issues proposals on financial reporting of going concern uncertainties
26 Jun 2013
The FASB has issued proposed Accounting Standards Update (ASU), ‘Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption’. The proposed ASU is intended to improve disclosures of uncertainties related to an organisation’s ability to continue as a going concern.
The main provisions provided in this proposed ASU will place the responsibility on management to evaluate an entity’s going concern uncertainities and the timing and content of related footnote disclosures. In addition, an entity that is an SEC filer will be required to evaluate and disclose if there is significant doubt in their ability to continue as a going concern within 24 months of issuing its financial statement.
On convergence with IFRSs, the proposed ASU guidance is similar to the IASB guidance as they both place emphasis on management to evaluate uncertainties concerning an entity’s ability to continue as a going concern and to provide disclosures of those uncertainties. However, the guidance differs when an organisation does not prepare its financial statements on a going concern basis. Also, IFRS has one threshold for disclosures of going concern uncertainties, while the FASB’s proposals have two thresholds under US GAAP. Those two thresholds are (1) for all organisations that indicate the start of going concern uncertainties and (2) for SEC filers with significant doubt in their ability to continue as going concern. Lastly, IFRS provides a consideration period of at least 12 months after financial statement date with no cap afterwards, while the FASB guidance will be capped at 24 months after the financial statement date.
The proposed ASU has a comment deadline of 24 September 2013.
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