An auditor can give a going concern opinion when they have doubts about the financial longevity of a company. Certain expenses and assets may be deferred in financial reports if a company is assumed to be a going concern. A new section was added to discuss and clarify concepts related to accounting and reporting of contingencies and litigations. This is an early implementation of GASBS 89, Accounting for Interest Cost Incurred before the End of Construction Period which is applicable for reporting periods beginning after December 15, 2019.
What is the opposite of a going concern?
A company that is not a going concern has gone bankrupt and liquidated its assets. The opposite of a going concern or profitable company may also be an unprofitable company.
The closures have caused a material adverse effect on the Going Concern‘s revenues, results of operations, and cash flows, including the Company’s ability to meet its obligations when due, which raises substantial doubt about the Company’s ability to continue as a going concern. FASB ASC 205 requires that management evaluate this probability when preparing GAAP-basis financial statements each annual and interim period. The FASB’s use of the term probable in FASB ASC 205 means likely to occur and is consistent with its use with respect to contingencies in FASB ASC 450. If a reporting entity faces conditions that give rise to uncertainties about its ability to continue to operate (e.g., recurring operating losses), it may be necessary to make adjustments in its financial statements (e.g., record asset impairment losses) and provide related disclosures. Nevertheless, financial statements should continue to be prepared using the going concern basis of accounting, even when the going concern uncertainties are significant. Disclosures may be required to alert investors about the underlying financial conditions and management’s plans to address them. AU-C 570B, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern, discusses auditor responsibilities relating to going concern.
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A https://www.bookstime.com/ ceases to exist as the same legally separate entity and its operations are absorbed into, and provided by, one or more continuing governments. The Board continued deliberations by discussing the general focus for the proposed guidance for going concern uncertainties and severe financial stress . The findings of studies funded with Crain Grants indicate that relatively few governments cease to continue as a going concern in the sense of dissolving without arrangements to ensure that the needs of affected citizens continue to be met. This suggests that the population of governments with going concern uncertainties is small. Consequently, the number of governments likely to be affected by potential amendments to current going concern disclosure guidance may continue to be small. This latest edition includes updated guidance on changes in AICPA auditor’s report terminology.
Similarly, updated cash flow projections to support management’s plans may not be available or may be less reliable because of major uncertainties due to the COVID pandemic. However, the evaluation of management’s plans will be necessary in determining whether the Company’s disclosures are adequate and the likelihood of needing to add a going concern emphasis-of-matter paragraph to the report. That could be done by comparing forecasts for recent previous periods and the current period with actual results.
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Each company should be subject to a going concern assessment that is rigorous and balanced and takes into accounts its specific circumstances in light of the general economic conditions. The auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited . Information about such conditions or events is obtained from the application of auditing procedures planned and performed to achieve audit objectives that are related to management’s assertions embodied in the financial statements being audited, as described in Auditing Standard No. 15, Audit Evidence. The auditor evaluates an entity’s ability to continue as a going concern for a period not less than one year following the date of the financial statements being audited .
Also, if the government is authorized, or required to establish and maintain a special assessment bond reserve, guaranty, or sinking fund, GASB Statement 6 requires using a debt service fund for this purpose. The term proceeds of specific revenue sources establishes that one or more specific restricted or committed revenues should be foundation for a special revenue fund. They should be expected to continue to comprise a substantial portion of the inflows reported in the fund. While GASB Statement 54 has not provided a numeric range for substantial portion of inflows, it was recommended that at least 20 percent is a reasonable limit for reporting a special revenue fund. Local governments need to consider factors such as past resource history, future resource expectations and unusual current year inflows such as debt proceeds in their analysis.