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Going Concern Proposal to Follow Liquidation

The Financial Accounting Standards Board is expected soon to issue a new proposal for new disclosure requirements regarding when a company's ability to remain in business as a going concern is in jeopardy.

The board indicated in February it expected to issue a new exposure draft in late March or early April. FASB first issued a proposal in 2008 but made a series of course corrections on how to get such warnings out to investors. Most recently, the board has decided to adopt a new financial reporting model for management's assessment and disclosures, requiring management to consider each reporting period the likelihood that an entity might be unable to meet its obligations as they come due for a reasonable period of time into the future.

The proposal is expected to advise management that they must start providing disclosures in financial statements when existing events or conditions indicate they are nearing a point where it is more likely than not that they may not meet their obligations in the ordinary course of business. The proposal is expected to say management can consider whatever plans they have to head off such trouble in deciding if they must make such disclosures, but only if those actions are within the normal course of business.