Going-Concern Disclosure Memo
Which paragraph the going-concern note is written under, what it must contain, and a draft built from your own words.
The evaluation looks one year past the date the statements are issued, or available to be issued. The memo asks which one applies to you rather than deciding it.
Is it probable the entity cannot meet its obligations as they come due within the window, leaving out plans not yet fully implemented? The cash-runway calculator can help you get there. The memo never answers it for you.
Informational only — not audit, attest, legal, tax, or investment advice. We are the preparer, never the filer of record. Unfolding Values is not an audit firm.
The going-concern note: which paragraph, and what it must say
The going-concern evaluation has two steps, and the note depends on both. The first asks whether conditions and events, taken together and before management's plans not yet fully implemented, make it probable the entity cannot meet its obligations as they come due within one year after the statements are issued or available to be issued. If they do not, there is no going-concern note to write under ASC 205-40-50-12 or ASC 205-40-50-13.
If they do, the second step asks whether management's plans alleviate the doubt, and only some plans may be weighed: those probable of being carried out within the year and probable of mitigating the conditions, and never a plan to liquidate. The answer decides the paragraph. Alleviated, and the note describes the conditions, how significant management judged them, and the plans. Not alleviated, and the note must also say plainly that substantial doubt exists.
This tool records both steps as you answer them, sorts each plan into counts or disregarded with the paragraph that decides it, names the governing paragraph and every element it requires, and drafts the note from your own words once each element is given. It does not decide whether substantial doubt is raised, whether a plan is probable, or whether the plans are enough.
Frequently asked questions
What is the difference between a 50-12 and a 50-13 disclosure?
Both arise only once conditions and events raise substantial doubt before management's plans are considered. If the plans that count alleviate the doubt, the note is written under ASC 205-40-50-12: the principal conditions, management's evaluation of their significance, and the plans that alleviated the doubt. If they do not, it is written under ASC 205-40-50-13, which adds a statement in the notes that there is substantial doubt about the entity's ability to continue as a going concern within one year after issuance, and describes the plans intended to mitigate.
Which of management's plans are allowed to count?
Only a plan that is probable both of being effectively implemented and of mitigating the conditions (ASC 205-40-50-7). A plan not probable of implementation within one year after issuance is disregarded (ASC 205-40-50-9), and a plan to meet obligations through liquidation never counts (ASC 205-40-50-11). Implementation is generally probable only where the plan was approved before the issuance date by those with authority to approve it (ASC 205-40-50-8); the memo flags any plan you count without that approval.
Does the memo decide whether there is substantial doubt?
No. Step one (ASC 205-40-50-4 and 50-5) and the weighing of plans against conditions (ASC 205-40-50-10) are the preparer's judgments. The memo records your answers, applies the exclusions the paragraphs state, and refuses to finish while a judgment is left blank. The cash-runway calculator can help you reach the step-one answer.
Last year we disclosed substantial doubt. What changes this year?
While the conditions persist the disclosure continues and grows, explaining how the conditions and plans changed. In the period substantial doubt no longer exists, the note says how the conditions were resolved (ASC 205-40-50-14). The memo asks which situation you are in and will not draft without the explanation.