F1-Going Concern

Question 1

What mean Going Concern?

Answer 1

when it reasonably expected to remain in existence and to be able to settle all its obligations.

Question 2

What is the going concern presumption?

Answer 2

under GAAP we presume that the reporting entity paid their bills as they become due and do the F/S under Going concern basis

Question 3

What happened when exist imminent liquidation?

Answer 3

-is no longer considered as going concern and must prepare the F/S under liquidation basis.

Question 4

When the management is required to evaluate the conditions of the entity?

Answer 4

• when exist substantial doubt about the entity’s ability to continue as going concern.
• the time cannot exceed the year beyond the F/S

Question 5

What should include in the evaluations of the managers?

Answer 5

• if exist substantial doubt to meet all its obligation due within a year from F/S
• evaluation should occur annual and interim reporting period
• management should be base on relevant conditions and events that are know at the F/S date
• management should consider both quantitative and qualitative factors.

Question 6

What are te quantitative and qualitative factors that management should consider?

Answer 6

• Financial condition, including sources of liquidity
• entity’s obligation due or anticipated in the next year (even if te are not recognize)
• funds to maintain operations (resources, obligations, expected cash flow)
• other conditions as negative financial trends, indication of financial dificults.

Question 7

what are the mitigation factors?

Answer 7

• whether it is probable that the plan will be effectively implemented
• whether it is probable that the implementation will be successful

Question 8

when we use going concern basis?

Answer 8

• no substantial doubt exist- no disclosure
• substantial doubt alleviated
• substantial doubt not alleviated

Question 9

substantial doubt alleviated disclosures?-no hay mas duda

Answer 9

• primary condition or event that initial raised substantial doubt
• management evaluations of those conditions or events
• management plans that alleviated the substantial doubt

Question 10

substantial doubt not alleviated disclosures?-se queda la duda

Answer 10

-primary condition or event that initial raised substantial doubt
-management evaluations of those conditions or events
management plan that are intended to mitigate the adverse condition.

Question 11

Difference between IFRS and US GAAP?

Answer 11

• GAAP require liquidation basis-IFRS not
• GAAP require disclosure when substantial doubt exist-IFRS require disclosure when management is aware of MATERIAl uncertainties
• GAAP require assess going concern condition at F/S date- IFRS- at BS date