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Management Gets New Rule to Make Going Concern Disclosure

Tammy Whitehouse | August 27, 2014

It is now management’s job, not just the auditor’s, to raise a red flag when there is good reason to doubt a company’s ability to remain in business.

After years of debating how to establish such a requirement, the Financial Accounting Standards Board has finalized a new rule that puts the onus on management to alert investors when a company is headed for rough waters. FASB issued Accounting Standards Update No. 2014-15 to establish new disclosure requirements about a company’s ability to continue as a going concern.

The rule requires management to assess whether there are conditions or events that raise “substantial doubt” about a company’s ability to remain a going concern for a year into the future. The standard defines terminology and...

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