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ARTICLE · 10 MAY 2013

On The Horizon - April 30, 2013

Grant Thornton LLP
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A discussion on the Accounting Standards Update 2013-07, "Liquidation Basis of Accounting", which clarifies the guidance on how and when to use the liquidation basis of accounting.

United StatesAccounting and Audit
Grant Thornton'S Audit Practice Group
Grant Thornton'S Audit Practice Group
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FASB clarifies liquidation basis of accounting guidance

The Board has issued Accounting Standards Update (ASU) 2013-07, Liquidation Basis of Accounting, to clarify guidance on how and when to use the liquidation basis of accounting. The new standard is designed to address constituents' requests for clarified guidance and is expected to reduce diverse practices in this area.

The ASU requires entities to use the liquidation basis of accounting when liquidation is "imminent," meaning that (a) there is a remote likelihood that the entity will return from liquidation, and (b) either one of the following conditions also exists:

  • An authoritative person (or persons) has approved a liquidation plan, and the likelihood that other parties will block the plan's execution is remote.

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