F2M1-Going conern Flashcards
1
Q
Management responsibility to evaluate -Going concern
A
- Probable that co not able to meet obligation with one year from issuance date
- substantial doubt continue as going concern
- 1 year from issue date -Not balance sheet date.
- each annual / interim
- Consider both qualitative and quantitative factors (entities current financial position, entities obligation next year even if not recognized in current year, fund necessary -cashflow, other condition fin difficulty, negative trends.
2
Q
Mitigating factors
A
Event/condition exist-creating doubt
consider
Mngt plans to mitigate
mitigating effect evaluated based on
- probable plan will effectively implemented.
- plans will be successful.
will be successful in alleviating doubt
3
Q
Management evaluation and disclosure
A
- Substantial doubt alleviated - must disclose - include doubt, Mngt evaluation, plan, allivated
- Substantial doubt not alleviated =must disclose
Going concern is used in both the cases.
4
Q
US Gap Vs IFRS
A
- US GAAP requires liquidation basis if liquidation is imminent / IFRS does not give any guidance on going or liquidation method.
- US -disclose if substantial doubt
IFRS- disclose if Mngt is aware of material inconsistency -may give rise to doubt - US-1 year from date of issuance
IFRS - 1 year from balance sheet date.