Pharmaceutical and Life Sciences

Accounting Alerts
 

FASB defines management’s going concern responsibilities

The purpose of this Alert is to highlight key changes and implications of ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance applies to all companies and is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. This means that this guidance will be effective for the upcoming 2016 10-K for companies with a calendar year-end.

To assess the ability to continue as a going concern, management will need to consider relevant conditions that are known (and reasonably knowable) at the issuance date. Substantial doubt exists if it is probable that the entity will be unable to meet its obligations within one year after the financial statement issuance date.

Highlights include:

  • Before the new ASU, no guidance existed for management on assessing going concern uncertainties
  • Management will need to assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the issuance date at each interim and annual period 
  • Disclosures are required if conditions give rise to substantial doubt whether or not they are alleviated by management’s plans

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Karen C. Young
US Pharmaceutical and life sciences Assurance Leader
Tel: +1 (973) 236 5648
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