Going Concern

Question 1

When is an entity considered to be a going concern?

Answer 1

If it is reasonably expected to remain in existence and be able to settle all its obligations for the foreseeable future

Question 2

How are FS prepared if an entity’s liquidation is imminent?

Answer 2

Liquidation basis

Question 3

What is mgmt.’s responsibility related to going concern

Answer 3

Evaluate whether their is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time not to exceed one year beyond the date of the FS

Question 4

When should FS be prepared using the going concern basis?

Answer 4

When there is no substantial doubt, substantial doubt is alleviated, or substantial doubt in not alleviated

Basically at all times unless liquidation is imminent

Question 5

What is required if there is substantial doubt but it is alleviated?

Answer 5

Footnote disclosures:

1. primary conditions/events that raised substantial doubt
2. Mgmt’s evaluation
3. Mgmt’s plans to alleviate

Question 6

What is required if substantial doubt is not alleviated?

Answer 6

Must state in footnotes that there is substantial doubt

Footnote disclosures:

1. primary conditions/events that raised substantial doubt
2. mgmt.’s evaluations
3. mgmt.’s plans intended to mitigate

Question 7

When should mgmt evaluate an entity’s ability to continue as a going concern?

Answer 7

Each annual and interim reporting period