X
X

Find Your Specialist

X

Contact Us

Go Back

FASB reaches conclusions at Jan 31 meeting

At today’s Financial Accounting Standard Board (FASB) meeting the FASB completed deliberations on several topics. Two of the more important conclusions regarded going concern and fair value disclosure requirements for nonpublic entities.

Going Concern

The Board instructed the FASB Staff to draft a proposed Accounting Standard Update (ASU) to be issued for public comment regarding going concern. The ASU would require management to assess the entity’s ability to continue as a going concern as of each reporting date. If existing events or conditions indicate it is more-likely-than-not that the entity may not be able to meet its obligations within a reasonable period of time from the reporting date (date of the balance sheet), disclosures would have to be provided.

The more-likely-than-not threshold is lower than the probable threshold. In other accounting guidance, it is generally interpreted to mean great than a 50% chance of occurrence, while probably is considered much higher. Currently, there are no specific requirements in GAAP for such an assessment. Most of the current guidance around going concern considerations is found in the audit guidance.

If the ASU is eventually adopted, and we believe it will be, look to the auditing bodies, specifically the PCAOB and the Auditing Standards Board (of the AICPA) to issue revised auditing guidance regarding going concern.

Nonpublic Entities and Fair Value Disclosure Requirement

When ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued, it contained a requirement to disclose the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)‖for financial instruments where fair value is required to be disclosed. This was required even for financial instruments that were not required to be measured at fair value in the balance sheet.

The FASB has affirmed that this disclosure requirement is not applicable to nonpublic entities.  With this decision, the FASB shows an emerging understanding that the reporting requirements of nonpublic financial statements will not always be the same as public companies.  Given this recent trend, preparers of nonpublic financial statements can take encouragement that their concerns are being heard. We will continue to monitor these developments.

For more information about complex accounting and disclosure requirements such as FASB deliberations, or other accounting developments, please email Bill Godshall, Lead Quality Control Partner and leader of our Public Company Audit and Advisory Practice at bill.godshall@frazierdeeter.com.

Related Articles

Privacy Overview

When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

You can enable or disable our use of cookies per category.

When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

You can enable or disable our use of cookies per category.

Necessary Always Enabled

Essential cookies enable you to navigate our Site and use certain features, such as accessing secure areas of our Site and using other features of our service that require us to keep track of certain information as you navigate from page to page. Although some of these cookies are “required” to enable certain functionality, you can disable them in the browser, but doing so will limit your ability to use the features supported by such cookies.

Functionality cookies are cookies that support features of the Site, such as remembering your preferences.

These cookies collect information about how you use our Site, including which pages you go to most often and if they receive error messages from certain pages. These cookies are only used to improve how our Site functions and performs.

From time-to-time, we may engage third parties that track individuals who visit our Site. These third parties may track your use of the Site for purposes of providing us with certain marketing automation features (to help us improve our outreach to current and prospective clients) and providing you with targeted advertisements.