Substantial doubt about going concern (ASC 205-40) is one of the hardest calls a small filer makes — and one of the most consequential to disclose. This structures the assessment.
What this tool does
You enter cash, burn, obligations, and planned mitigations; it assesses whether there's substantial doubt within the one-year look-forward and what the disclosure path looks like.
Who it's for
CFOs and controllers at companies with liquidity pressure heading into a filing.
How to use it — step by step
- Enter your runway. Cash, monthly burn, and expected inflows.
- Add obligations. Debt maturities, covenants, and commitments in the next 12 months.
- Enter mitigations. Financing, cost cuts, asset sales — and how probable they are.
- Read the assessment. Substantial doubt or not, and whether mitigations relieve it.
How to read your result
The test is two-step: is there substantial doubt, and do your plans (that are probable of being implemented and effective) relieve it? Both steps must be documented.
Worked examples
The same tool behaves differently depending on what you put in. Here are 3 situations.
Eight months of cash, a debt maturity
Inputs: Short runway plus a note due in ten months.
What the tool shows: Flags likely substantial doubt within the one-year window.
What to do: Build the disclosure and a probable, documented mitigation plan.
Covenant breach looming
Inputs: You may trip a covenant.
What the tool shows: Treats a probable covenant breach as an obligation that can trigger doubt.
What to do: Address waivers/amendments and disclose the risk.
Credible financing in progress
Inputs: A term sheet is signed.
What the tool shows: Lets you test whether probable mitigations relieve the doubt.
What to do: Document probability and effectiveness carefully.
Common questions
What's the time horizon? One year from the date the financial statements are issued.
Do plans remove the disclosure? Only if they're probable of being implemented and of relieving the doubt — and documented.
Does this replace your auditor? No — going concern is a shared judgment; verify with your auditor.