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An Analysis of the FASB’s New Going-Concern Standard and Its Relation to Liquidation Basis Accounting Requirements

Joseph E. Trainor, Cynthia R. Phillips, Maryanne Cangialosi
January 1, 2018
SKU:
BUS-004153
Region: 
North America
Topic: 
Accounting & Finance
Length: 
20 pages
Keywords: 
FASB, Liquidation, investment, capital-market
Student Price: 
Free
Average rating: 
0
Whether a company expects to remain in existence for a reasonable time into the future is a fundamental consideration for investors and creditors when evaluating investment alternatives. Investors and creditors are understandably concerned about management’s ability to enhance the capital-providers’ investment, and any doubts about an entity’s future demise or liquidation is decision-useful information for these capital-market participants. To provide investors and creditors with some assurance about a company’s future survival, the accounting standards establish the going-concern assumption. While the going-concern assumption is a foundational underpinning of the financial reporting process, until recently, an entity’s management has had no formal responsibility for evaluating or disclosing conditions about an entity’s ability to continue as a going concern. The burden of assessing the going-concern assumption has historically resided with the entity’s independent auditor, and disclosure of going-concern issues was not required if management was able to satisfy the auditor that the conditions raising uncertainty would be alleviated.

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