FASB has updated GAAP to eliminate a critical gap in existing business continuity disclosure standards. This … ... the financial statements should have a disclosure discussing the going concern. Also, consider adding an emphasis-of-matter paragraph (regarding going concern) to your compilation report. Where the auditor considers that there is insufficient evidence to support or The going concern concept or going concern assumption states that businesses should be treated as if they will continue to operate indefinitely or at least long enough to accomplish their objectives. Going concern disclosure The financial statements should not be prepared on a going concern basis where events after the reporting date indicate that the going concern assumption is no longer appropriate [para 14 of MFRS 110 “EventsAfter the Reporting Period”. If they are misleading, then include a selected disclosure regarding going concern. The Going Concern Challenge. In August 2014, FASB released ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern [Accounting Standards Codification (ASC) 205-40]. Going Concern Disclosure Issues Clarified in Newly Issued FASB Standards. The going-concern standard explains that these disclosures may change over time as new information becomes available and that disclosure of how the substantial doubt was resolved is required in the period in which substantial doubt no longer exists … Most critically, there can be significant downsides for companies that are the subject of going concern disclosure. Consider the following scenario. Ask yourself whether the financial statements would be misleading (without the going concern disclosure). An entity must include disclosures related to uncertainty about its ability to continue as a going concern in the notes to the financial statements in annual and interim periods until the conditions or events giving rise to the uncertainty are resolved. This new standard specifically requires management to evaluate going concern and make disclosures in the notes to the financial statements when appropriate. 2. With so much uncertainty surrounding both the pandemic and the economy, management and auditors face a difficult task in evaluating their companies and clients. One disclosure example is “These financial statements are prepared on a going concern basis because the holding company has undertaken to provide continuing financialsupport so that the Company … An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. the financial statements on a going concern basis. Given the varying and discrete effects of COVID-19 on different companies and industries, management may be required to assess several risk indicators and multiple scenarios to adequately assess the range of potential impacts on their liquidity, ability to continue as a going concern, and adequacy of disclosures.
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