Going Concern

Question 1

Going concern

Answer 1

if reasonably expected to remain in existence and can pay all their dues in the upcoming year

Question 2

Upcoming year

Answer 2

GAAP: 1 year from the date of financial statement issuance date or the sate at which issued to the public
IFRS: 1 year from B/S date

Question 3

Imminent Liquidation

Answer 3

Exception
Financial statement prepared under imminent liquidation basis of accounting
Only under GAAP

Question 4

Substantial Doubt

Answer 4

Probable or likely that the entity will not be able to meet its financial statement obligations as they become due within one year of the issuance date

Question 5

Evaluation needed for

Answer 5

Annual and Interim periods

Question 6

Mitigating Factors

Answer 6

If there are doubts about the ability to continue:

a) Are there plans to mitigate the risk (line of credit?)
a1) Is it probable that the plans will be effectively implemented
a2) Is it probably that the implemented plans will be successful

Question 7

Doubts

Answer 7

a) No substantial doubt
b) Substantial Doubt Alleviated
c) Substantial doubt not alleviated
* ALL EVALUATED UNDER GOING CONCERN ASSUMPTION

Question 8

No substantial doubt

Answer 8

No disclosures required

Question 9

Substantial doubt alleviated

Answer 9

If substantial doubt exists but is alleviated as a result of management’s plan then
a) going concern
b) disclosure in financial statements
i) conditions that initially raised doubts
ii) management’s evaluation of the significance of those events
iii)plans that alleviated these doubts
ONLY GAAP

Question 10

Substantial Doubts not Alleviated

Answer 10

1) Going concern;
2) FN Disclosure
i) Doubts about the ability to continue as a going concern within one year of the financial statement issuance date
ii) primary condition raising the doubt
iii) same as above
iv) plans intended to mitigate these adverse conditions and their effects

Question 11

GAAP and IFRS

Answer 11

Management’s responsibility to evaluate the entity’s ability to continue as going concern and and provide relevant disclosures when necessary

Question 12

IFRS

Answer 12

When management is aware of material uncertainties that may give rise to substantial doubt about going concern disclose: it doesnt matter if you have a plan or not; concerned about uncertainties that may lead to doubts and not the doubts themselves