Going Concern & Goodwill Opinions

Sanli Pastore & Hill
Aug 15
2 min read

Going Concern

Under AICPA Auditing Standards Board SAS No 132, company management must evaluate conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the financial statement issue date.

Specifically, management must determine if the company will be unable to meet its obligations

as they become due within one year after the date that the financial statements are issued.

SPH Can:

Analyze conditional or unconditional obligations due or anticipated within one year
Identify other mitigation efforts including: asset sales, licensing arrangements, and vendor concessions
Perform 12 month rolling cash flow forecasts
Provide analysis of mitigation efforts including force majeure, insurance coverage, rent abatement and the impact on cash flow
Analyze current financial condition, including available liquid funds and access to credit

Goodwill Impairment

FASB Accounting Standards Update No. 2021-03 for ASC 350 requires a quantitative impairment test, whereby impairment loss is be measured as the excess of a reporting unit's assets carrying amounts over their fair values. Prior to goodwill impairment testing companies must first test other assets including indefinite-lived and definite-lived intangible assets. A company may still perform the optional qualitative assessment for a reporting unit to determine if it is more likely than not that goodwill is impaired.

SPH Can:

Value intangible assets: brands, patents, technology, customer base, non-competition agreements and goodwill
Assess likelihood of sustainable assets that will recover after black swan events to maintain, recover, and/ or support goodwill and other asset values
Assess other mitigation measures including: reputation, distinct and monopolistic products, and unique locations popular to customer base
Provide support for the optional qualitative assessment impairment test including: review of management projections versus historical performance, and changes in industry, competitor and economic conditions.