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Cayman Funds 2016

ARE YOU A GOING CONCERN? The rules of US Generally Accepted Accounting Principles (GAAP) are no longer silent on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and what management should disclose in their fi nancial statements. In August 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, titled Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance about management’s responsibilities in this regard. Guidance has been issued to reduce diversity in timing and content of footnote disclosures. Management need to consider this guidance to produce US GAAP-compliant fi nancial statements. 62 CAYMAN FUNDS | 2016 Specifi cally, the amendments (1) provide a defi nition of the term ‘substantial doubt’; (2) require an evaluation every reporting period including interim periods; (3) provide principles for considering the mitigating effect of management’s plans; (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans; (5) require an express statement and other disclosures when substantial doubt is not alleviated; and (6) require an assessment for a period of one year after the date the fi nancial statements are issued (or available to be issued). The meaning of ‘substantial doubt’ Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the fi nancial statements are issued (or within one year after the date the fi nancial statements are available to be issued when applicable). Management assessments—considered in the aggregate When evaluating an entity’s ability to meet its obligations, management shall consider quantitative and qualitative information about the following conditions and events, among other relevant conditions and events known and reasonably knowable at the date the fi nancial statements are issued: a) The entity’s current fi nancial condition, including its liquidity sources at the date the fi nancial statements are issued (for example, available liquid funds and available access to credit); b) The entity’s conditional and unconditional obligations due or anticipated within one year after the date the fi nancial statements are issued (regardless of whether those obligations are recognised in the entity’s fi nancial statements); c) The funds necessary to maintain the entity’s operations considering its current fi nancial condition, obligations, and other expected cash fl ows within one year after the date the fi nancial statements are issued; and d) The other conditions and events, when considered in conjunction with (a), (b), and (c) above that may adversely affect the entity’s ability The FASB’s update Presentation of Financial Statements— Going Concern (Subtopic 205- 40) requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in the US auditing standards. Ben Leung and Joseph Domingo of EisnerAmper Cayman provide some guidance.


Cayman Funds 2016
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