New FASB Statements on Going Concern and Subsequent Events

FASB Going-Concern Statement

FASB Subsequent Events Statement

The FASB has drafted modifications to Going Concern and Subsequent Event standards. The Going Concern modifications primarily seem to exist to conform U.S. GAAP to international GAAP but does throw in an interesting wrinkle--rather than the present requirement to have management look forward one year from report date, the proposed language would be one year from balance sheet date or longer if necessary. On the subsequent event front, the look forward time would be one year from issue of statements OR one year from date statements could be issued--an accomodation for nonpublicly traded entities. Additionally, the proposed statement makes a distinction between realized subsequent events (events prior to balance sheet date completed by report date--include in financials) and nonrealized subsequent events (occuring after balance sheet--disclose in notes) and disclosure of management's process for subsequent event evaluation.

It is my opinion (which may not be terribly valuable) that material going concern problems should either: [a] cause use of liquidation accounting (not generally accepted accounting principles as I understand it) with an explanatory paragraph where the auditor either disagrees (probably leading to an adverse opinion) or agrees and includes in the explanatory paragraph justification for GAAP departure or [b] require a qualified opinion if GAAP-based statements are issued unless GAAP basis would be so misleading that an adverse opinion is required. At present, explanatory paragraph and disclosure in notes of underlying problem is all that is required in most going-concern cases. The other question on going concern: is conformance with international GAAP worth giving up the bright line on 12 months after report date?--I guess I'm not sure. On subsequent events--I can foresee confusion on the concept of "date available to be issued."