A finished ACC-685 Topic 4 going concern note draft example, testing three plans for probability, finding substantial doubt unrelieved and drafting a note stating the maturity, the gap and each plan's status. Searches like "acc 685 topic 4 assignment example", "acc685 topic 4 sample" and "acc-685 topic 4 example" land here.
What a finished ACC-685 Topic 4 going concern note draft looks like
The draft begins with the evaluation that decides what the note must say, amounts illustrative. Over the year after the statements are issued, the company needs $17.3 million: the $18.0 million loan less $2.1 million of cash, plus $1.4 million of projected operating outflow. Management's plans would cover it: a $12.0 million sale of an idle plant, a $3.0 million contribution the owner has committed in writing, and a $4.0 million loan in a bank's term sheet. Under ASC 205-40 a plan relieves substantial doubt only if it is probable of being implemented and of mitigating the conditions. The owner's commitment meets that bar; the plant sale is an unsigned letter of intent and the term sheet is not a commitment. The note therefore states that substantial doubt exists, then gives the terms, the gap and each plan's status.
How an ACC-685 Topic 4 example is structured
The draft is arranged in two halves, the evaluation a reviewer reads and the note an investor or lender reads. The evaluation opens with the look-ahead period, one year after the date the statements are issued. A needs section follows with the monthly cash forecast behind the $17.3 million. Each plan is then tested twice, for the probability it will be implemented and for the probability it would mitigate the conditions in time, each supported by documents: signed agreements, the owner's bank statements and the lender's correspondence. A conclusion paragraph states that only $3.0 million is probable. The note comes next: the conditions, management's evaluation, the three plans and their status, and the sentence stating substantial doubt. A final paragraph explains why a softer version, calling the doubt alleviated, was rejected.
A look-ahead period fixed to issuance
The evaluation period runs one year from the date the statements are issued, so the loan maturing in ten months falls inside it without any interpretation.
Needs measured from a monthly forecast
Cash on hand, projected outflows and the maturity combine into a $17.3 million requirement, with the forecast attached so a reviewer can test the tightest months.
Each plan tested for probability twice
A plan counts only if implementation is probable and its effect would arrive in time, and the draft records the documents that support or fail each test.
Why only the owner's money counts
A written commitment backed by evidence of funds is probable, while a letter of intent and a term sheet leave the other $16.0 million uncommitted.
A note that states the doubt
The draft says in plain words that substantial doubt exists about the company's ability to continue as a going concern, because the guidance requires that statement when plans fall short.
The softer alternative considered and rejected
Describing the doubt as alleviated would rest on documents nobody has signed, so the draft explains why that version would mislead a lender weighing renewal.
Where marks go in ACC-685 Topic 4
The version that loses most is a note listing management's plans in hopeful language and never saying whether substantial doubt exists. Papers that treat a letter of intent as a completed sale count $12.0 million the company may never receive. The opposite error ignores the owner's written commitment and overstates the gap. Evaluations running twelve months from the balance sheet date, rather than from issuance, measure the wrong period and can miss a maturity. Some drafts describe the conditions and then attach boilerplate about management's confidence, which tells a reader nothing the balance sheet did not. A draft also forfeits marks when the rejected conclusion is never argued, since choosing between alleviated and not alleviated is the judgment being graded, and a draft that skips it has not shown one.
Get an ACC-685 Topic 4 example written to your instructions
Send your ACC-685 Topic 4 instructions, the rubric and the company's statements or disclosure prompt from your section. We write a custom example to them, with the evaluation period set, needs measured, each plan tested for probability, the conclusion argued against the rejected one and the note drafted, back in 24 to 48 hours. The first one is free.
ACC-685 Topic 4 questions, answered
When does management have to evaluate going concern?
At each annual and interim reporting period, under ASC 205-40. Management considers whether conditions or events, taken together, raise substantial doubt about the entity's ability to meet its obligations as they become due within one year after the date the statements are issued, or available to be issued. The evaluation is management's own, and the auditor separately reaches a view.
What makes a plan probable enough to count?
The plan must be probable of being effectively implemented within the look-ahead period and probable of mitigating the conditions. Evidence usually means something signed or approved: a board decision, an executed agreement, a committed facility or a documented capacity to fund. Intentions and nonbinding documents rarely meet that bar, which is why the draft counts the owner's commitment and not the letter of intent.
What changes in the note if doubt is alleviated?
The note still describes the conditions that raised substantial doubt, management's evaluation of their significance and the plans that alleviated it, but it omits the statement that substantial doubt exists. That difference is small in word count and large in meaning, which is why the draft argues the conclusion before writing a sentence of the note itself.