Going Concern and Financial Reporting

Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009 was published in October 2009 and is effective for accounting periods ending on or after 31 December 2009. The Guidance is based on three principles covering the process which directors should follow when assessing going concern, the period covered by the assessment and the disclosures on going concern and liquidity risk. The Guidance applies to all companies and in particular addresses the statement about going concern that must be made by directors of listed companies in their annual report and accounts. It supersedes the Guidance for Directors of Listed Companies that was issued in 1994.

Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009

In March 2011 the FRC announced the launch of an enquiry led by Lord Sharman to identify lessons for companies and auditors addressing going concern and liquidity risk. See The Sharman Inquiry for further details including its Preliminary Report and Recommendations which were issued in November 2011.

The FRC published Challenges for audit committees arising from current economic conditions in November 2009. The purpose of the document is to assist audit committees by identifying key questions that they may need to consider when preparing for December 2009 year end annual reports and accounts in the light of economic conditions present in the latter half of 2009. In addition to going concern and liquidity risk issues, the publication addresses year end planning, specific risks and uncertainties and reliance on assumptions and models for cash flow and valuation information..

 Challenges for Audit Committees arising from current economic conditions (November 2009)

Exposure Draft: Going Concern and Liquidity Risk - Guidance for Directors of UK Companies 
The Exposure Draft was published in May 2009 with a comment deadline of 28 August 2009. Final Guidance based on the Exposure Draft was published on 15 October 2009 (see above).

 Exposure Draft: Going Concern and Liquidity Risk - Guidance for Directors of UK Companies

 Feedback Statement

Responses to Exposure Draft: Going Concern and Liquidity Risk - Guidance for Directors of UK Companies
 

A consultation paper Going concern and financial reporting: proposals to revise the guidance for directors of listed companies was published in September 2008.

Consultation Paper: Going Concern and Financial Reporting (September 2008) 

Responses to Consultation Paper: Going Concern and Financial Reporting (September 2008)

The FRC Study into going concern and liquidity risk was published in November 2008. The study examined the annual reports and accounts of thirty UK listed companies that had adopted the requirements of International Financial Reporting Standard 7 (Financial instruments: disclosure) for their December 2007 or March 2008 annual accounts. The study identifies opportunities for improvement by bringing together many of the disclosures about going concern and liquidity risk. The study also identifies a need for some companies to address better the IFRS 7 requirements to disclose how liquidity risk is managed in practice and to disclose the summarised data used by key management personnel in managing liquidity risk.

 Study: Going Concern and Liquidity Risk Disclosures (November 2008)

The APB published Bulletin 2008/10 in December 2008. The purpose of the Bulletin is to assist auditors to respond to the challenges of the current economic conditions. It stresses that the current difficult economic conditions do not of themselves mean that a material uncertainty exists about an entity's ability to continue as a going concern or justify auditors modifying their auditor's reports to draw attention to going concern.

 APB Bulletin 2008/10 'Going Concern Issues During the Current Economic Conditions' (December 2008)