FASB has proposed new guidance to help determine when it's appropriate to switch an organization’s accounting basis from that of a going concern to liquidation, and how to do so.
This guidance is especially helpful for companies facing a meltdown. The proposal says a company should switch when management determines liquidation is imminent.
The goal of the proposed Accounting Standards Update (ASU) is to improve financial reporting about certain risks inherent in financial instruments and how they contribute to the reporting organization’s broader risks.
Specifically, the ASU proposes new disclosures related to liquidity risk and interest rate risk, two risks that were prominent during the recent financial crisis and that continue to be relevant to reporting organizations on an ongoing basis. The FASB previously issued enhanced disclosure requirements about credit risk.
Read more from fasb.org.