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FASB proposes guidance on going concern uncertainties

The US Financial Accounting Standards Board (FASB) has issued a proposed Account Standard Update, Presentation of Financial Statements (Topic 205): Disclosure of Uncertainties about an Entity's Going Concern Presumption.

Under US GAAP, financial statements are prepared under the presumption that the reporting organisation will be able to continue as a going concern, however GAAP does not provide guidance about management's responsibilities in evaluating or disclosing going concern uncertainties, or when and how uncertainties should be disclosed.

FASB chairman Leslie Seidman said "Stakeholders have expressed concerns about diverse practices that have arisen in the financial statement footnotes about uncertainties surrounding an organisation's ability to continue as a going concern -- that is, its ability to continue to operate such that it will be able to realise its assets and meet its obligations in the ordinary course of business."

The proposal would require management to evaluate going concern uncertainties more frequently, prescribe a threshold and related guidance for starting disclosures, require an assessment period for 24 months after the financial statement date and provide a threshold for Securities and Exchange Commission (SEC) filers to determine whether there is substantial doubt about an organisations ability to continue as a going concern.

The proposal will apply to all reporting organisations and will be open for comment until 24 September 2013.

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