What mean Going Concern?
when it reasonably expected to remain in existence and to be able to settle all its obligations.
What is the going concern presumption?
under GAAP we presume that the reporting entity paid their bills as they become due and do the F/S under Going concern basis
What happened when exist imminent liquidation?
-is no longer considered as going concern and must prepare the F/S under liquidation basis.
When the management is required to evaluate the conditions of the entity?
- when exist substantial doubt about the entity’s ability to continue as going concern.
- the time cannot exceed the year beyond the F/S
What should include in the evaluations of the managers?
- 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.
What are te quantitative and qualitative factors that management should consider?
- 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.
what are the mitigation factors?
- whether it is probable that the plan will be effectively implemented
- whether it is probable that the implementation will be successful
when we use going concern basis?
- no substantial doubt exist- no disclosure
- substantial doubt alleviated
- substantial doubt not alleviated
substantial doubt alleviated disclosures?-no hay mas duda
- primary condition or event that initial raised substantial doubt
- management evaluations of those conditions or events
- management plans that alleviated the substantial doubt
substantial doubt not alleviated disclosures?-se queda la duda
-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.
Difference between IFRS and US GAAP?
- 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
