Going Concern

In: Business and Management

Submitted By spgibson2
Words 4936
Pages 20
Going Concern

Group 4

ACCT 632, Advanced Financial Acct Theory

Liberty University

Aug 7, 2013


Summary of Going Concern current exposure draft

Comparison and Contrast of current Going Concern theory and standards

1 Guidance provided by AU Section 341

2 Guidance provided by 17 U.S.C. §229.303

3 Proposed guidance of exposure draft

Comparison and Contrast of U. S. GAAP and IFRS with respect to Going Concern

1 Current Going Concern variations between U. S. GAAP and IFRS

2 Variations between proposed changes to Going Concern issues

The Benefits and Costs of a Going Concern Amendment

1 Providing preparer guidance

2 Making management responsible

3 Addressing investor concerns

Provisions in light of the FASB’s Conceptual Framework

1 Understandability

2 Decision usefulness

3 Relevance

4 Comparability

Response to Going Concern Exposure Draft

1 Proposed changes or corrections to the current exposure draft


Going Concern People go into business for many reasons, but no one goes into business with the expectation that they are not going to be successful. For that reason, acquisition is made for those assets that are needed to run the company with the understanding that there will be no need to arrange for early liquidation. Because there is no prediction to inform someone that their business may or may not make it, managers must rely heavily on accountants to ensure the basics are covered when dealing with financial reporting. A good start is to become familiar with the going concern assumption. The exposure draft was issued on June 26, 2013 in order to discuss amendments for accounting for assets and liabilities. “Under U.S. GAAP, financial statements are prepared under the presumption that a reporting entity will be…...

Similar Documents


...The Great Divide "What are we doing today?" David called and asked the minute he got off work. As he raced his old green car down the interstate to come to my house, Richard and I waited. This became a daily occurrence mainly because we had more fun with each other than anyone else. We were inseparable the whole summer. "David, we are going swimming," I usually responded because I had just moved into a house with a pool, and it always felt as hot as hell outside. His body was not nearly as muscular as Richard's, but he didn't care because his looks weren't his first concern. If his jokes or his stupid dance moves made you laugh, then he would do them all day long. So, with his orange swimming trunks on, he did a belly flop almost everyday, and almost everyday it made me cry with laughter, and that's all he really wanted. Considering it was two boys and I, the whole eating healthy was no concern for them. Swimming would make them feel like they were starving, so David always suggested Gatti's. He engulfed about ten pieces faster than I could chew one, and he usually regretted that decision shortly after. With our stomachs too full to suck in, we all had one thing on our mind; sleep. The three of us pilled into his old green car and drove to Richard's. He had most of the upstairs to himself, so there was plenty room for us to be the bums we were. "Ya'll, I'm sick of being worthless, let's do something," he would always say after we had acted like bums for a couple of days......

Words: 1900 - Pages: 8

Audit Case Going Concern

...count), a debt restructure to meet obligations, or having to revise business operations. 1b) Upon determining that there is substantial doubt about going concern the auditor should obtain information from the management that contains plans intended to mitigate this assertion then assess those the likelihood that those plans can be effective and actually work. After this he should consider the adequacy of disclosure about the going concern and include an explanatory paragraph to reflect the decision. 1c) Specific areas that the auditor should focus on regarding managements plans are plans to dispose of assets, borrow money or restructure debt, reduce or delay expenditures, increase ownership equity. 1d) If the auditor determines that there is substantial doubt about the entities ability to continue as a company the auditor should give an unqualified opinion with an explanatory paragraph disclosing this information. 1e) If the auditor determines that there is not substantial doubt he needs to consider the need for disclosure and possibly just give a standard unqualified report. 3) The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The company has been experiencing losses and negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are the sale of a non-cost-effective factory and the acquisition of a large competitor. The......

Words: 1073 - Pages: 5

Enviromental Concerns

...Environmental Concerns Technology is an ever-changing entity. As soon as a company goes through the time and expense of upgrading their hardware and technology, new technology emerges in the industry. With all of the new and emerging technology, the concern of what to do with the old technology and how to dispose the old so that the company can install and use the new technology. One of the biggest concerns when recycling old hardware is the effects that the recycling process will have on the environment. With this becoming a bigger concern every year, old computer hardware has become commonly known as electronic waste or e-waste. We are a world driven by the new and the shiny. With new technology always on the cusp of being developed, consumers always have something new to look forward to and purchase. One of the first concerns of computers was the amount of electricity that the machines needed to consume in order to make them work. Many do not think about the amount of carbon that is produced through the electricity that is consumed during the use of the system. Carbon being released into the air can be harmful when considering the composition of the air that we breathe. The next concern is the chemicals that are used in the composition of the computer and its components. Computers contain metals such as arsenic, lead, and mercury that are hazardous to those who are exposed for long periods. If these chemicals are not disposed of properly they can seep into......

Words: 522 - Pages: 3

Client Concerns

...Client Concerns and Helping Skills Cruz Cardenas Jr. BSHS/305 May 5, 2014 Client Concerns and Helping Skills Everyday individuals come across issues in life that cannot be resolved on their own. These problems keep those people from becoming productive citizens due to the many barriers that they encounter. Some of the issues can be anywhere from people not being able to meet their own needs, unable to reach self-sufficiency or economic stability, and individuals unable to cope with new problems in the modern world. There are many needs or requirements for social care as well, stemming from those that are unable to take care of themselves, social control for those who display inappropriate behavior, and rehabilitative services to promote self-help in individuals lacking independence. More specifically, many clients and communities struggle with childcare issues, which can sometimes be a huge burden on families. There are also those with debilitating diseases such as AIDS/HIV, domestic violence, homelessness, lack of education and skills, physical disabilities, mental illness, substance abuse, sexual and verbal abuse as well as individuals recovering from natural disasters. For decades now, people have asked the human services professionals for assistance in learning how to cope and overcome obstacles while growing as a person by strengthening their own abilities and becoming more productive and resilient. As a helper, the human service professional is responsible for......

Words: 1038 - Pages: 5


...isA 570, going concern hAs been A well-esTAblished source of guidAnce for AudiTors. AddiTionAl direcTion hAs been provided by The iAAsb’s prAcTice AlerT AudiT considerATions in respecT of going concern in The currenT economic environmenT, issued in JAnuAry 2009. relevAnT To AccA QuAlificATion pAper p7 The recent global economic crisis, commonly referred to as the credit crunch, has provided many challenges for both the preparers and the auditors of published financial statements. For auditors, ISA 570, Going Concern is a well-established source of guidance, and additional direction has been provided by the IAASB’s Practice Alert Audit Considerations in Respect of Going Concern in the Current Economic Environment, issued in January 2009. In the UK, the APB issued the Bulletin Going Concern Issues During the Current Economic Conditions in December 2008. Both of these are examinable documents for the Paper P7 exams in 2010. The auditor’s objectives in relation to going concern ISA 570 contains well-established guidance on going concern, including the following objectives for the auditor: ¤ to obtain sufficient appropriate audit evidence regarding the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements ¤ to conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and......

Words: 1895 - Pages: 8

Going Green

...Hospitality companies have an ethical responsibility to go green even at the expense of the bottom line Nowadays it has become fashionable for businesses and organizations to adopt and promote environmentally friendly approach. This adaptation not only helps making these organizations noticeable but also is considered to be cost effective. The expectations and pressures of going green have also affected the hospitality industry as customers are rapidly becoming aware of the environmental concerns that the world is facing and expect the organization that they are associated with to adopt such operational and service management scenarios which are environment friendly.It is not easy to present an argument against healthier work space and environment. This essay will analyze different aspects of adopting ‘green activities’ by the hospitality organizations and will discuss if it is possible for them to maintain healthy revenues while adopting green activities. The word green generally refers towards the activities which are considered to be environmentally responsible by the consumers and stake holders, adopted by the organization in question. Such activities are meant to reduce the environmental foot print of the organization by reducing their use of natural resources and a balanced contribution towards the eco systems (Graci & Dodds, 2009).There are variety of ways to choose from when a company decides to ‘go green’ starting from minor activities to bigger more......

Words: 2421 - Pages: 10

Going, Going, Gone

...Authoritative Literature: AU Section 341 The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern Source: SAS No. 59. This section provides guidance to the auditor in conducting an audit of financial statements in accordance with generally accepted auditing standards with respect to evaluating whether there is substantial doubt about the entity's ability to continue as a going concern. Continuation of an entity as a going concern is assumed in financial reporting in the absence of significant information to the contrary. Ordinarily, information that significantly contradicts the going concern assumption relates to the entity's inability to continue to meet its obligations as they become due without substantial disposition of assets outside the ordinary course of business, restructuring of debt, externally forced revisions of its operations, or similar actions. AU Section 722 Interim Financial Information Source: SAS No. 100; SAS No. 116; SAS No. 121. The purpose of this section is to establish standards and provide guidance on the nature, timing, and extent of the procedures to be performed by an independent accountant when conducting a review of interim financial information. The term interim financial information means financial information or statements covering a period less than a full year or for a 12-month period ending on a date other than the entity's fiscal year end. Interim financial information may be condensed or......

Words: 1921 - Pages: 8

Political Concerns

...Terrence J. Bradshaw Group 8 4/23/2015 Political Concerns Georgia Public Broadcasting is a state run network which is a sub division of the PBS membership television stations. GPB is catered towards Georgia and issues surrounding the state. Where that be in regards to politics, murder cases, entertainment segments, and or other things happening in the state of Georgia. GPB has been known for its very non-biased approach to reporting. In a way GPB is like C-Span. It reports heavily on news and issues however it tries not to sway in regards to being bias. A news station as large as GPB has to be careful when reporting on the news because they wouldn’t want to lose advertisers which subsequently brings in revenue. For example if they seem to liberal conservative companies might back out of supporting the station and vice versa. Thus, GPB tries to remain objective yet unbiased when reporting on news (Mendez 42). April 20th, 2015 I sat down and watched two hours of nonstop GPB. I wanted to really grasp the political feel the network gave off. Despite my efforts there was not much to obtain from the programming. Strategically unbiased programming is what GPB specializes in. For example many of their segments are dedicated to sports. As reported by the Huffington Post in 2008, sports is the one thing that Americans seemingly agree on. Despite the different teams one might like there isn’t a political divide in the liking of sports itself. Sports is an easy way to get ratings......

Words: 1020 - Pages: 5

Cultural Concerns

...step towards improving community relations”. Because police officers heavily use profiling to do their job, having a diverse group of officers with similar cultural backgrounds is of utmost importance. Officers use profiling to match a person to the description of a perpetrator; it is not used to make matches based upon color, sex, religion, or culture. Nonetheless, when searching for a suspect in a minority neighborhood, it is beneficial to have officers who are of a similar racial and ethnic composition. When officers share a similar ethnic/ racial background with the communities they serve, they have inside knowledge of the inner workings of that community. According to Mack & Kelly (2004), “the police should be attuned to the concerns and changing priorities of their communities, and be willing to offer assistance in identifying and resolving sources of conflict that have a debilitating effect on the community”. Furthermore, a diverse team of officers makes it easier to build a partnership with the community and identify perpetrators. According to The United States Department of Justice (2003) “the challenge for law enforcement executives is to recognize community and cultural diversity by effectively responding to the law enforcement and community needs of culturally diverse groups”. Hence, it is strongly advised that the justice administration recruit a diverse body of officers who can provide services in sync with the values of the diverse communities they......

Words: 1564 - Pages: 7

Executive Responsibility for ‘Going Concern’ Disclosures Increases - the Cfo Report

...10/4/2014 Executive Responsibility For ‘Going Concern’ Disclosures Increases - The CFO Report - WSJ August 27, 2014, 5:58 PM ET Executive Responsibility For ‘Going Concern’ Disclosures Increases Corporate managers will have to make more uniform disclosures when there is substantial doubt about their business’ ability to survive, the Financial Accounting Standards Board said Wednesday. The FASB updated U.S. accounting rules, effective by the end of 2016, to define management’s responsibility to evaluate whether their business will be able to continue operating as a “going concern,” and make relevant disclosures in financial statement footnotes. Previously, there were no specific rules under U.S. Generally Accepted Accounting Principles and disclosures were largely up to auditors. Corporate executives had the option to make any voluntary disclosures they felt relevant. Investors, however, have grown frustrated with a lack of going concern opinions during the financial crisis that failed to warn them of impending bankruptcies. The FASB first issued a proposal at the peak of the financial crisis in 2008, but debate and revisions delayed the final standard, which didn’t go up for a vote until May. http://blogs.wsj.com/cfo/2014/08/27/executive-responsibility-for-going-concern-disclosures-increases/tab/print/ 1/2 10/4/2014 Executive Responsibility For ‘Going Concern’ Disclosures Increases - The CFO Report - WSJ Supporters of the changes have......

Words: 409 - Pages: 2

Asu 2014-15 Going Concern

...No. 2014-15 August 2014 Presentation of Financial Statements— Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern An Amendment of the FASB Accounting Standards Codification® The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An Accounting Standards Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification is being amended. It also provides other information to help a user of GAAP understand how and why GAAP is changing and when the changes will be effective. For additional copies of this Accounting Standards Update and information on applicable prices and discount rates contact: Order Department Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 Please ask for our Product Code No. ASU2014-15. FINANCIAL ACCOUNTING SERIES (ISSN 0885-9051) is published quarterly by the Financial Accounting Foundation. Periodicals postage paid at Norwalk, CT and at additional mailing offices. The full subscription rate is $242 per year. POSTMASTER: Send address changes to Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. | No. 404 Copyright © 2014 by Financial Accounting Foundation. All rights reserved. Content copyrighted by......

Words: 12619 - Pages: 51

Going Concern Issues

... Going Concern issues in financial reporting: a guide for companies and directors Published in 2009 by: Australian Institute of Company Directors (AICD) Level 2 255 George Street Sydney NSW 2000 Telephone: (+61 2) 8248 6600 Facsimile: (+61 2) 8248 6633 www.companydirectors.com.au publications@companydirectors.com.au Auditing and Assurance Standards Board (AUASB) Level 7 600 Bourke Street Melbourne VIC 3000 Telephone: (+61 3) 8080 7400 Facsimile: (+61 3) 8080 7450 enquiries@auasb.gov.au www.auasb.gov.au © Australian Institute of Company Directors (AICD) © Auditing and Assurance Standards Board (AUASB) © Financial Reporting Council (UK) 2009. Portions of this publication have been adapted and reproduced from an Auditing Practices Board Bulletin: Going Concern Issues During the Current Economic Conditions (December 2008) with the kind permission of the Financial Reporting Council (UK). All rights reserved. For further information please visit www.frc.org.uk or telephone +44 (0)20 7492 2300. © Portions of this publication have been adapted and reproduced from a KPMG Flash Report: How Concerned Should Directors be with Going Concern? (February 2009) with the kind permission of KPMG. All rights reserved. Typeset by Endnote design Printed by Ligare Pty Ltd National Library of Australia Cataloguing-in-Publication entry Going Concern issues in financial reporting: a guide for companies and directors/AICD, AUASB ISBN 9781876604158 (pbk.).......

Words: 15500 - Pages: 62

Mini- Case Going- Concern Reporting

... Mini- Case: Going- Concern Reporting. Refer to the mini-case “GM: Running on Empty” on page C11 and respond to questions 1– 6. 1. Reviewing GM’s financial information in GM Exhibit 1 and its stock price in GM Exhibit 2 , when do you first see signs of GM’s impending financial distress? 2. In referencing professional standards, what factors should auditors consider in evaluating potential going- concern uncertainties? 3. Considering your response to questions 1 and 2, do you believe that the going- concern uncertainty was warranted? Do you believe that Deloitte & Touche should have issued a going- concern opinion prior to 2008? 4. What economic factors existing in the United States during 2008 might have accelerated Deloitte & Touche’s decision to issue an audit opinion modified to disclose going- concern uncertainties? 5. Do you believe that the events immediately following GM’s bankruptcy alleviated the concerns that led to the issuance of the going- concern uncertainty? What issues would auditors need to consider in evaluating the ability of General Motors Co. (the new GM) to continue as a going concern? 6. Many companies believe that a going- concern opinion is a self- fulfilling prophecy ( that is, when a company receives a going- concern opinion, customers will not purchase products with warranties, suppliers will not provide short- term credit, and investors and creditors will not invest or loan). Would GM’s going- concern opinion influence your decisions regarding......

Words: 935 - Pages: 4

Ethical Concerns

...P4 & M3 Ethical concerns facing the communities Introduction I will be describing the ethical concerns facing the communities in which Apple oversees. For this part of the assignment I have chosen to continue using Apple as my selected organisation and look at them in more detail for this part of the task. Describe the ethical concerns facing the communities in which the selected business operates. Local communities Many businesses are of national importance and their activities have a crucial significance to local communities. Apple for example is a powerful presence in any community and can have an influence in many different ways. For more than 150 years, the British coalfields offered mining work to the communities around them. However, these communities were scarred for generations, because of them. Mining communities suffered a lot of environmental damage, with ugly slag heaps and, in some coalfields, serious coastal damage. Even today modern businesses leave their mark in many different ways on communities. Despite the environmental and other negative effects, local authorities still welcome new businesses. They bring jobs and cash to areas. When businesses of any size operate within a locality, there are always ethical concerns. Regional and national communities When entire communities go through difficulties, there are regional, and often national, effects. The UK car industry suffered from poor planning, inefficiency and bad industrial relations. The coal......

Words: 368 - Pages: 2

Act 101(Going Concern)

...'Definition of the 'going concern' concept The 'going concern' concept directs accountants to prepare financial statements on the assumption that the business is not about to go broke or be liquidated (i.e. where the business closes and sells all the assets for whatever price they can get).  So, unless there is significant evidence to the contrary, accountants will base their valuations and their reporting of financial data on the assumption that the business will remain in existence for an indefinite period. An indefinite period means the foreseeable future or long enough for the business to meet its objectives and to fulfill its commitments. It is important to note that the 'going concern' concept does not imply or guarantee that the business is profitable and will remain so for the foreseeable future. So, the 'going concern' concept assumes that the business will remain in existence long enough for all the assets of the business to be fully utilized. Utilized assets means obtaining the complete benefit from their earning potential. (i.e. if you recently purchased equipment costing $5,000 that had 5 years of productive/useful life, then under the going concern assumption, the accountant would only write off one year's value $1,000 (1/5th) this year, leaving $4,000 to be treated as a fixed asset with future economic value for the business). The 'going concern' concept supports the assumption that when a business buys assets like land, equipment, and buildings, it......

Words: 843 - Pages: 4