08 September 2008

FASB to converge going concern guidance under GAAP with IFRS

The rules under U.S. GAAP would converge with IAS 1, Presentation of Financial Statements, and IAS 10, Events after the Balance Sheet Date. The FASB will soon produce a draft of the converged guidance that will be open for consultation.

The FSAB decided that the guidance under US GAAP should converge with the international rules for an auditor's evaluation of an entity's ability to function as a going concern and the events that occur between the date of a financial statement and the issuance of the audited statement for that period.

 

As a result of the decision, the rules under U.S. GAAP would converge with IAS 1, Presentation of Financial Statements, and IAS 10, Events after the Balance Sheet Date, and be supplemented by the disclosure requirements in the American Institute of Certified Public Accountants' (AICPA) Statement on Auditing Standards (SAS) No. 1, Codification of Auditing Standards and Procedures, and AU Section 341, “The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern.” The Board also decided that the guidance should be consistent with AU Section 560, “Subsequent Events.”

While the FASB wants to get rid of the remaining differences between U.S. GAAP and IFRS, it doesn't want the revised guidance to address differences in refinancing of short-term obligations and curing breaches of borrowing.

The FASB's research staff will produce a draft of the converged guidance that will be voted on by the Board members. An exposure draft of the proposed changes will then be released for a 60-day comment period.

 

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