For companies that are on the brink of meltdown, the Financial Accounting Standards Board is proposing new guidance to help determine when it’s appropriate to switch their accounting basis from that of a going concern to liquidation, and how to do so.
Accounting standards assume that a company following them is a going concern with every expectation that it will remain in business for the foreseeable future, but the accounting is expected to change when it’s clear the company is winding down and liquidating. FASB says companies have followed different practices in making that transition to liquidation accounting so it issued a proposed Accounting Standards Update to put all companies on the same page.
