ASU No. 2013-07 Establishes Liquidation Accounting Principle in US GAAP
by Terri Eyden on
The Financial Accounting Standards Board (FASB) amended US GAAP to explain how businesses and other organizations should prepare financial statements when they're ceasing operations and selling assets to settle debts with creditors. The accounting board wants the financial statements to allow anyone reading them to understand what will be left after the debts have been paid.
On April 22, 2013, the FASB published Accounting Standards Update (ASU) No. 2013-07, Presentation of Financial Statements (Topic 205) – Liquidation Basis of Accounting.
The changes are effective for fiscal years that begin after December 15, the FASB said. The accounting board is permitting organizations going through liquidation to adopt the changes ahead of the effective date.
The financial statements should allow anyone reading them to "develop expectations about how much the organization will have available for distribution to investors after disposing of its assets and settling its obligations," the FASB said.
The amendments in ASU No. 2013-07 are carried out by adding Subtopic 205-30, Presentation of Financial Statements – Liquidation Basis of Accounting, to US GAAP. The update also adds three terms to the Accounting Standard Codification's master glossary: "liquidation," "statement of net assets in liquidation," and "statement of changes in net assets in liquidation."
As a result of the changes, organizations will have to use liquidation accounting when their liquidation is considered "imminent," the FASB said.
Liquidation is considered imminent when there's little chance the organization will survive the liquidation process or a forced process, such as a court-ordered bankruptcy, is in place.
The FASB issued a draft version of the changes last July in Proposed ASU No. 2012-210.
© 2013 Thomson Reuters/RIA. All rights reserved.
Source: Thomson Reuters
You may like these other stories...
Your 15-year-old may be tech-savvy enough to debug your computer, back-up data on your mobile devices, and help you stream episodes of Game of Thrones, but chances are you can’t expect them to display the same level of...
The Public Company Accounting Oversight Board (PCAOB) and the Danish Business Authority (DBA) entered into a cooperative arrangement on July 18 that gives both regulators oversight of audit firms in their respective...
Liberal groups object to bill barring taxes on Internet accessThe Internet Tax Freedom Act hasn’t been a controversial bill. In fact, it’s so popular that senators are seeking to pair it up with a far more...
Upcoming CPE Webinars
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
FRF for SMEs Series--Measurement and Disclosure Principles for various Consolidations and Business Combinations, Part 4B
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.