Register to get free articles
Want unlimited access? View Plans
Already have an account? Sign in
The Financial Reporting Council (FRC) has issued an updated guidance to help companies demonstrate the assessments underlying their going concern conclusions.
The non-mandatory guidance on the ‘Going Concern Basis of Accounting and Related Reporting including Solvency and Liquidity Risks’ now brings together the requirements of company law, accounting standards, auditing standards, listing rules, the UK Corporate Governance Code and other relevant regulation relating to reporting on the going concern basis of accounting and solvency and liquidity risks. It is intended for all UK companies except small companies and micro-entities.
It serves as a proportionate and practical guide for companies of different sizes to prepare high-quality, company-specific disclosures about their going concern conclusions.
Clarity around how these disclosures are reached promotes investor and end-user confidence, and enables these companies to access capital and support UK economic growth.
The guidance encourages directors to take a broader view, over a longer term, of the risks and uncertainties. It acknowledges that companies have risk management processes in place which underpin the assessment, and that the level of analysis applied depends on the size, complexity, and particular circumstances of the company.
It also acknowledges that the amount of information disclosed should be proportionate to the uncertainties to which the company is exposed – and to its financial and liquidity position.
The guidance outlines several key considerations for the effective reporting for the going concern assessment, including that directors should assess the appropriateness of adopting the going concern basis when preparing financial statements, consider any material uncertainties to be disclosed in the financial statements, and consider whether additional disclosures may be necessary, including disclosures about any significant judgements made and to provide a “true and fair” view.
The FRC’s executive director of regulatory standards, Mark Babington, said: “The FRC is focused on delivering proportionate guidance on both the production and usability of high-quality reporting, as it looks to support businesses’ access to capital and their contribution to UK economic growth. I encourage companies to make the most of this guidance to provide investors and other stakeholders with clear and coherent going concern disclosures.”
