ASA 570 - Going Concern - April 2006
EXAMPLES OF MITIGATING FACTORSEXAMPLES OF MITIGATING FACTORS
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EXAMPLES OF MITIGATING FACTORS
The significance of those indications which are related to cash flow or solvency can often be mitigated by the existence of, and management plans with respect to, factors such as those listed below:
Asset factors
(a) disposability of assets that are not operationally interdependent;
(b) capability of delaying the replacement of assets consumed in operations or of leasing rather than purchasing certain assets; and
(c) possibility of using assets for factoring, sale and leaseback, or similar arrangements.
Debt factors
(a) availability of unused lines of credit or similar borrowing capacity;
(b) capability of renewing or extending the due dates of existing loans; and
(c) possibility of entering into debt restructuring agreements.
Cost factors
(a) separability of operations producing negative cash flows;
(b) capability of postponing expenditures for such matters as maintenance or research and development; and
(c) possibility of reducing overhead and administrative expenditures.
Equity factors
(a) variability of dividend requirements;
(b) capability of obtaining additional contributions by owners; and
(c) possibility of increasing cash distributions from subsidiaries or associates.
Similarly, the significance of those indications which are not directly related to cash flow or solvency may also be mitigated by other factors. For example, the impact of losing a principal supplier may be mitigated by the availability of a suitable alternative source of supply.