FASB: ‘Going Concern’ is Management’s Responsibility

Executive managers of companies and not-for-profit organizations must make more uniform disclosures if there is significant doubt about a company’s ability survive, according to new standards released by the Financial Accounting Standards Board August 27, 2014.

Under Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, management is required to evaluate at each annual and interim reporting period whether it’s probable that the company will not be able to meet its obligations as they become due within one year after the date financial statements are issued and to provide related footnote disclosures.

Previously, there were no rules under U.S. Generally Accepted Accounting Principles and disclosures were largely up to auditors.

The new rules go into effect in the annual period ending after December 15, 2016. The new standard also clears the way for the Public Company Accounting Oversight Board to revisit its own going-concern standard for public company auditors.