Change Country

Tax & Assurance Guidance

Liquidation Basis of Accounting

Posted on August 15, 2012 by

Dave Van Damme

Dave Van Damme

Share This

Prior to the FASB recently issuing the proposed Accounting Standards Update (ASU), minimal guidance was present to apply The Liquidation Basis of Accounting. Consequently, there is diversity in the presentation of liquidation basis financial statements. The lack of guidance and diversity in practice  were growing concerns of the FASB. Therefore, the proposed ASU clarifies when and how an entity should present  liquidation basis financial statements.

An entity must prepare its financial statements using the liquidation basis when liquidation is imminent. Liquidation is “imminent” when:

  • A plan for liquidation has been approved by the person with authority to do so, and it is unlikely the plan will be blocked by outside sources
  • Liquidation is imposed by another force (example: involuntary bankruptcy), and it is unlikely the entity will return from liquidation

Other things to note:

  • Assets and liabilities must be presented in the financial statements at the cash or consideration level expected to be received or paid
  • Income and costs incurred during the liquidation period must be presented separately
  • The update will also touch on; methods to measure assets and liabilities, types of income and costs accrued, duration of liquidation, and much more

The FASB firmly believes that this update will improve the consistency and comparability of financial reporting. The comment period ends for this proposed ASU on October 1, 2012.

Share This

Dave Van Damme


Leading the firm's advisory & assurance group, Dave supports closely held businesses with audits, financial reporting and fraud analysis.

Related Insights

Foreign Direct Investment Survey Year 2022

Another five years have slipped by and that means it is once again time to complete the BE-12, Benchmark Survey of Foreign Direct Investment in the United States. While the official forms have not been released, final rules amending existing regulations became effective October 31, 2022, describing changes to the information collected.

by Sue Tuson

New Corporate Transparency Act Reporting Requirements

Learn about the new Corporate Transparency Act reporting requirements that go into effect on January 1, 2024, including beneficial owners, company applicants, exempt entities and due dates.

by Sue Tuson

Keeping Up With Digital Taxes

To the uninitiated, selling digital products and services can seem like a much easier business model than selling physical goods. While there may be advantages to skipping inventory and warehouse needs, the digital tax landscape can be tricky to navigate. 

by Miroslav Georgiev

by Sue Tuson

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content