F2 - M2 - Going Concern

Question 1

Going Concern

Answer 1

“reasonably” expected to remain in existence and settle all its obligations for the foreseeable future.

• Issue: Valuation (assets reduced value if bankrupt) and Classification
• Disclosure required by GAAP
• If liquidation is imminent, prepare under liquidation basis of accounting

Question 2

Management’s Responsibility to Evaluate

Answer 2

within one year, after F/S are issued (quarters and annual)

Question 3

Mitigating Factors

Answer 3

if conditions raiser substantial doubt about going concern, management “plans” intended to mitigate conditions will be “successful”

Question 4

No Substantial Doubt

Answer 4

No Disclosure

Question 5

Substantial Doubt Alleviated

Answer 5

Must Disclose, prepared under going concern basis. Footnotes below:

• Conditions or concerns that raised substantial doubt
• Managements evaluation of the significance
• Managements “plans” to alleviate

Question 6

Substantial Doubt Not Alleviated

Answer 6

Must disclose, prepared under the going concern basis of accounting

• Conditions or concerns that raised substantial doubt
• Managements evaluation of the significance
• Managements “plans” to alleviate

Question 7

US GAAP vs IFRS

Answer 7

• GAAP requires liquidation basis of accounting, IFRS does not have guidance, 1 year.
• IFRS requires disclosures when management is aware of material uncertainties,
• GAAP = 1 year issuance of F/S, IFRS = 1 year issuance of B/S Date