Going Concerning
AYN 415
Research report: Accounting Regulatory Environment
Word Count: 1361
Prepared by
Raymond Morar 07541783
Yi Wang 07409745
Project 1: Going Concern
Background
The FASB’s rationale for this project is to increase consistency in the already existing going concern reporting model and disclosures. This project was added to provide guidance for entities in assessing their ability to continue as a going concern, and the timing, nature and extent of associated disclosure requirements (FASB, 2013). Finally these standards would help management decide where disclosure is appropriate.
Alternative approaches
In terms of alternatives IFRS defines going concern as the period in the foreseeable future (Finance Train, 2013). According to IAS 1 Presentation of Financial Statements “an entity preparing IFRS financial statements is presumed to be a going concern.” Furthermore if there are significant concerns about the ability to continue as a going concern, these uncertainties must be disclosed by management and financial statements not prepared under a going concern basis (Deloitte, 2013).
The FASB 2008 Discussion draft outlines a second alternative where the same going concern reporting model should be used between public and non public entities. It was argued that any differences would increase complexity and confusion (FASB, 2008).
Proposed course of action
The proposed courses of action outlined by the most recent board meeting are as follows.
The Disclosure threshold definition for MLTN (more likely than not) in terms of inability to meet obligations within reasonable time when presenting in the financial statements is proposed to be viewed as benchmark not as a broad threshold (FASB, 2013). Standard setters have agreed to have the term also use example indicators to better help managers decide when to disclose.
The Definition of “outside the ordinary course of business” now takes into account management plans and examples are provided that will
Research report: Accounting Regulatory Environment
Word Count: 1361
Prepared by
Raymond Morar 07541783
Yi Wang 07409745
Project 1: Going Concern
Background
The FASB’s rationale for this project is to increase consistency in the already existing going concern reporting model and disclosures. This project was added to provide guidance for entities in assessing their ability to continue as a going concern, and the timing, nature and extent of associated disclosure requirements (FASB, 2013). Finally these standards would help management decide where disclosure is appropriate.
Alternative approaches
In terms of alternatives IFRS defines going concern as the period in the foreseeable future (Finance Train, 2013). According to IAS 1 Presentation of Financial Statements “an entity preparing IFRS financial statements is presumed to be a going concern.” Furthermore if there are significant concerns about the ability to continue as a going concern, these uncertainties must be disclosed by management and financial statements not prepared under a going concern basis (Deloitte, 2013).
The FASB 2008 Discussion draft outlines a second alternative where the same going concern reporting model should be used between public and non public entities. It was argued that any differences would increase complexity and confusion (FASB, 2008).
Proposed course of action
The proposed courses of action outlined by the most recent board meeting are as follows.
The Disclosure threshold definition for MLTN (more likely than not) in terms of inability to meet obligations within reasonable time when presenting in the financial statements is proposed to be viewed as benchmark not as a broad threshold (FASB, 2013). Standard setters have agreed to have the term also use example indicators to better help managers decide when to disclose.
The Definition of “outside the ordinary course of business” now takes into account management plans and examples are provided that will
References: AASB 101 (2013). Presentation of Financial Statements. Retrieved from: http://www.aasb.gov.au/admin/file/content105/c9/AASB101_09-07_COMPsep11_07-12.pdf Deloitte (2013). IAS 1 – Presentation of Financial Statements. Retrieved from: http://www.iasplus.com/en/standards/standard5 FASB Staff Document (2012). Revenue Recognition – Potential Changes to U.S GAAP. Retrieved from: http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175823816301&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs FASB (2013). Going Concern. Retrieved from: http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FProjectUpdatePage&cid=1176160506645 FASB (2013) http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB/FASBContent_C/ProjectUpdatePage&cid=900000011146 FASB (2008) http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175818749651&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs FASB (2013) http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175825812710&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs Finance Train (2013) http://financetrain.com/going-concern-ifrs-vs-gaap/ IASB (2013) http://www.ifrsaccounting.com/ifrsrevenue.html IFRS (2012) http://www.ifrs.org/Documents/RR0512b07A.PDF S.J.GRAND (2011)