How long past the end of the year should a company’s ability to continue as a going concern be considered?
Rules for Going Concern Evaluation
The current rules say “for a reasonable period of time not to exceed one year beyond the date of the financial statements”. That seems fairly straightforward, but in practice there is a range of views about what that means for going concern. Some suggest that it is “one year beyond the balance sheet date”. Others extend the date out to “one year beyond the audit report date”. Others apply some vague date between the two.
A new accounting standard (ASU 2014-15) nails down the look-forward date. When the new rule becomes effective in 2016, the date will be one year from the issue date of the financial statements. This means that management’s financial projections will extend up to several months beyond a year.
If you would like clarification about going concern evaluation, call us today at 214-545-3965 or email [email protected] for detailed guidance.