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Update on the current board issues: September 2014

Audit committee issues

 

FASB, PCAOB actions regarding going concern disclosures

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On August 27, the FASB issued a new standard that requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosure in certain circumstances.

Previously, there was minimal guidance for management about when and what to disclose about going concern uncertainty. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The extent of disclosure is determined by whether management has adequate plans to alleviate the substantial doubt.

In light of the recent accounting standard issued by the FASB, the Public Company Accounting Oversight Board has issued a staff audit practice alert.

The alert reminds external auditors to continue following related PCAOB standards. It says that auditors should look to the applicable financial reporting framework—whether US GAAP or International Financial Reporting Standards—to assess management's going concern evaluation and the related disclosures in the financial statements and audit opinion.

The new standard applies to all companies and is effective for annual periods ending after December 15, 2016.

[For more information on the FASB and PCAOB actions regarding disclosure of uncertainties about a company’s ability to continue as a going concern, read PwC’s In depth (Going concern: FASB defines management’s going concern assessment and disclosure responsibilities).]