The FASB recently finalized an Accounting Standards Update on Liquidation Basis of Accounting, known as ASU 2013-07. This update is designed to help companies and other entities understand how to prepare financial statements when they expect to cease all of their activities and liquidate their assets. The purpose of financial statements prepared on this basis is to help investors and other claimants estimate how much they can reasonably expect to recover from the liquidation.
The requirements introduced in ASU 2013-07 are effective for financial statements of public companies, private companies, not-for-profit organizations and employee benefit plans starting no later than annual reporting periods beginning after December 15, 2013 and interim reporting periods included therein. Early adoption is permitted.
To help companies apply this new guidance, Mayer Hoffman McCann’s Professional Standards Group has prepared this Substance of the Standard summarizing the new requirements and providing examples of when the liquidation basis should be applied.