Management’s Going Concern Responsibilities Defined
In August 2014, the Financial Accounting Standards Board (FASB) defined management’s responsibility to evaluate whether substantial doubt exists about an entity’s ability to continue as a going concern. Professional auditing standards require auditors to evaluate the going concern presumption, but previously there was a lack of guidance in generally accepted accounting principles for financial statement preparers. Accounting Standards Update (ASU) 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, clearly requires management to perform a going concern evaluation, defines “substantial doubt” and clarifies management’s going concern disclosure responsibilities; these include principles for considering and disclosing the mitigating effect of management’s plans. The amendments apply to all entities, including not-for-profit organizations; they are effective for the annual period ending after December 15, 2016, and annual and interim periods thereafter, with early application permitted.