1. MHMMessenger TM Mayer Hoffman McCann P.C. An Independent CPA Firm A publication of the Professional Standards Group In the past week, the Financial Accounting Standards Board issued a new standard that requires management to evaluate whether substantial doubt exists that an entity will be able to continue as a going concern. Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-15 or the standard) defines, for the first time in US GAAP, the key terminology and responsibilities of management related to an entitys ability to continue as a going concern. The standard is expected to decrease the diversity of practice that exists today in the evaluation of the ability for an entity to continue as a going concern and create some consistencies between the requirements of US GAAP and requirements of the Securities and Exchange Commission. Basic Requirements Management will now be required to assess whether substantial doubt about an entitys ability to continue as a going concern exists. The primary consideration to establish whether substantial doubt exists is to evaluate in aggregate whether conditions and events indicate that it is probable an entity will not be able to meet its obligations when they come due. The assessment is limited to the one-year period after the our roots run deepTM financial statements are either issued or are available to be issued when applicable (for a private company, generally one year from the auditor or accountants report date). The initial evaluation does not consider managements plans that may mitigate the substantial doubt. After establishing that substantial doubt exists, managements plans for the one-year period are evaluated to determine whether it is probable the plans will be effectively implemented and, if so, if it is probable the plans will mitigate the conditions and events that created the substantial doubt. Probable A critical threshold within the standard is the term probable. Disclosure Requirements If substantial doubt is determined to exist and managements plans are found to 1) probably be implemented and 2) probably be effective at mitigating the substantial doubt, then an entity discloses: 1. The principal conditions or events that raised the substantial doubt about the entitys ability to continue as a going concern, 2014 Mayer Hoffman McCann P.C. 877-887-1090 www.mhmcpa.com All rights reserved. September 2014 The FASB Asks: Will your Entity Continue as a Going Concern? Probable is used in the same context as it is currently used in relation to assessing contingencies, and is generally interpreted as 70-75% chance of an event occurring.

2. MHMMessenger 2. Managements evaluation of the significance of those conditions or events in relation to the entitys ability to meet its obligations, and 3. Managements plans that alleviated substantial doubt about the entitys ability to continue as a going concern. If managements plans are determined to 1) not be probable of being effectively implemented or 2) probably not be effective at mitigating the substantial doubt, then the following disclosures are included in the financial statements: 1. A statement that there is substantial doubt that the entity will be able to continue as a going concern, 2. Principal conditions or events that raise substantial doubt about the entitys ability to continue as a going concern, 3. Managements evaluation of the significance of those conditions or events in relation to the entitys ability to meet its obligations, and 4. Managements plans that are intended to mitigate the conditions or events that raise substantial doubt about the entitys ability to continue as a going concern. In subsequent years, if substantial doubt continues to exist, updates to the disclosure are required to be made including descriptions of how conditions and plans have changed from year to year. Once the substantial doubt is removed, an explanation for what caused the substantial doubt to be removed is included in the disclosure. Changes in Practice The inclusion of these requirements in US GAAP will have an impact on the preparation of virtually all entities financial statements. The management of many entities have not previously evaluated the ability to continue as a going concern; instead the issue was addressed through the audit due to the auditors requirement to assess an entitys ability to continue as a going concern for one year after the balance sheet date. The new guidance will require management to make this assessment and requires the assessment to be done for a period that extends beyond the requirements under the auditing standards. In addition, disclosure will now be required even when managements plans alleviate the substantial doubt. Effective Date The standard is effective for all entities beginning with annual periods ending after December 15, 2016 (the December 31, 2016 financial statements for a calendar year-end entity). The evaluation and disclosure requirement applies to interim financial statements issued after the first annual period the standard is effective. Early adoption is permitted. For More Information If you have any specific questions, comments or concerns, please share them with Ernie Baugh or James Comito of MHMs Professional Standards Group or your MHM service professional. You can reach Ernie at ebaugh@mhm-pc.com or 423.870.0511 and James at jcomito@cbiz.com or 858.795.2029. The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. 2014 Mayer Hoffman McCann P.C. 877-887-1090 www.mhmcpa.com All rights reserved. 2 Please contact your MHM auditor to further discuss the impact on your audit or audit report.