Going concern (ASC 205-40)

Since 2016, management, not the auditor, must evaluate every reporting period whether conditions raise substantial doubt about the company's ability to continue as a going concern within one year after the date the financial statements are issued. For a biotech, the condition is almost always cash: if the forecast shows the money running out inside that window, substantial doubt exists.

Management then considers whether its plans, such as a financing, a partnership, or cost reductions, are probable of being implemented and of alleviating the doubt. Plans that require third parties, like an equity raise that has not closed, usually cannot be considered probable. If the doubt is alleviated, the conditions and plans are disclosed. If not, the statements say that substantial doubt exists, and the auditor's report carries an explanatory paragraph.

The evidence is the twelve-month cash forecast, so the forecast needs to exist, be updated each quarter, and be reviewed by the board. Going-concern language is not a failure; it is a disclosure. But it affects financing terms, vendor credit, and listing compliance, so the timing of raises around reporting dates is a board-level topic.