Fasb Week 1 Assignment

Presentation of Financial Statements- Going Concern

When trying to determine if a company had the ability to continue as a “going concern,” GAPP provided no specific guidance. Management had no involvement and was not accessing the company’s ability on whether or not it could continue as a going concern. The only requirement was for auditors to evaluate if the company has the ability to continue as a going concern and for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited (Financial Accounting Standards Board). Meanwhile, lack of guidance lead to issues such as who’s to say what a reasonable time really should be and the content of footnote disclosures.

In an effort to reduce or even eliminate these issues, the amendment focused on, defining key terms in a more detailed manner and management playing a key role in evaluating if there is substantial doubt about a company ability to continue as a going concern and it has to be provided in footnote disclosures as well. The disclosure statement should include circumstances or events that raise substantial doubt about the company to continue as a going concern, management evaluation of the situation and the conditions it has on the company’s ability to meet its obligations, as well as management’s plans to mitigate the events that prevents the company to continue as a going concern (Financial Accounting Standards Board). Also, after the mitigation factors has been initiated and the substantial doubt is not alleviated, the company is required to have an express statement and other disclosures and an assessment for a period of one year after the date that the financial statements are issued.

The amendments of this update are to become effective for the annual period ending after December 15, 2016. The GAAP amendment and the IFRS current reporting standards are somewhat in sync with one another, minus a few rules, such as, the assessment period and reporting...