FASB Reaffirms Requirements For Using Liquidation Basis of Accounting

NORWALK, Conn.—Members of Financial Accounting Standards Board reaffirmed Dec. 12 that entities would be required to prepare their financial statements using the liquidation basis of accounting when liquidation becomes imminent.

The board also clarified that liquidation would be considered imminent when a plan of liquidation is approved or imposed on the entity by those, such as a court, with decision-making power.

In addition, the board agreed that all entities, both limited lived and indefinite lived entities, would be subject to the guidance provided the entity’s liquidation was not as planned at inception.

“I’m supportive of [this viewpoint] because of its ...