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Feedback Statement: Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks)
The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.
© The Financial Reporting Council Limited 2025
The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London EC2Y 5AS
1. Executive summary
- In August 2024, the Financial Reporting Council (FRC) published an Exposure Draft setting out proposals for revised Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risk).
- The revised guidance brings together the latest requirements and provisions of company law, accounting standards, auditing standards, the UK Corporate Governance Code (the Code) and other regulations relating to reporting on the going concern basis of accounting, and solvency and liquidity risks in the financial statements, and in strategic reports.
- The FRC's objectives in revising the guidance are to incorporate recent developments in the corporate reporting framework and auditing standards, evolving reporting practice, and the FRC's continued focus on encouraging high-quality reporting within the annual report.
- The FRC received 14 responses from accountancy firms, accountancy professional bodies, representative bodies of investors and preparers, and a preparer.
- Respondents largely welcomed the proposed update to the guidance and supported the key changes proposed such as:
- including companies that apply the Code within its scope;
- additional guidance on overarching disclosure requirements, especially in situations when the going concern basis of accounting is appropriate and there are no material uncertainties, but reaching that conclusion involves significant judgement; and
- a revised range of factors and additional guidance on techniques that can be used to support the assessment process.
- Respondents also made a variety of suggestions for improvements to the guidance, which the FRC has taken into account.
- This Feedback Statement summarises the responses received to the Exposure Draft and the FRC's response to them.
- In February 2025 the FRC issued Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risk) (the Guidance), finalising the proposals in the Exposure Draft.
2. Introduction and background
1The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work.
2The Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks) (the Guidance) brings together the requirements and provisions of company law, accounting standards, auditing standards, the UK Corporate Governance Code (the Code) and other regulations relating to reporting on the going concern basis of accounting, and solvency and liquidity risks in the financial statements, and in strategic reports.
3The guidance is intended to help companies perform assessments and prepare high-quality reporting in relation to the appropriateness of the going concern basis of accounting, and solvency and liquidity risks. This information is critical for investors and may inform capital allocation decisions. The guidance is therefore an important support tool for UK business.
4The FRC's objectives in revising the Guidance are to incorporate recent developments in the corporate reporting framework and auditing standards, evolving reporting practice, and the FRC's continued focus on encouraging high-quality reporting within the annual report.
5This edition of the Guidance replaces the FRC's Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks, issued in 2016 and includes within its scope both companies that apply the UK Corporate Governance Code (the Code, Code companies) and non-Code companies.
6The FRC consulted on an Exposure Draft of the revised Guidance between 5 August 2024 and 28 October 2024 and received 14 responses.
7Copies of the responses received can be found on the FRC website.
8The table below sets out the number and category of respondents to the Exposure Draft.
| Category of respondent | Number |
|---|---|
| Accountancy firms | 8 |
| Accountancy professional bodies | 2 |
| Representative bodies of preparers | 2 |
| Individual preparers | 1 |
| Representative bodies of investors | 1 |
| Total | 14 |
3. Summary of responses
1The purpose of this Feedback Statement is to summarise the comments received in response to the Exposure Draft and the FRC's response to them.
2In analysing the responses, judgement has been applied in categorising the comments. When respondents did not address a question or stated that they had no comments, this is reflected under the category 'Did not comment' throughout.
Responses to the public consultation
Question 1: Scope
Do you think the scope of the draft Guidance as set out in Section 2 is appropriate? If not, why not?
| Category of response | Number |
|---|---|
| Agreed | 9 |
| Agreed with reservations | 3 |
| Disagreed | 1 |
| Sub-total | 13 |
| Did not comment | 1 |
| Total | 14 |
3Respondents generally supported the scope of the Guidance and welcomed the inclusion of Code companies in this edition of the Guidance.
4Although most respondents agreed, or agreed with reservations, with excluding small companies and micro-entities from the scope of the Guidance, some respondents noted that certain aspects of the Guidance may be helpful to these companies. Some of these respondents suggested that the FRC redrafts the scoping section to acknowledge this more clearly.
5Some respondents also suggested that there is a need for separate tailored guidance for small companies and micro-entities and encouraged the FRC to consider how that may be best addressed. One respondent who disagreed with the scope suggested that tailored guidance for small companies should be included within the Guidance.
FRC response
6The FRC has proceeded as proposed, while making some drafting changes to Section 2 to make it clearer that certain parts of the Guidance may be useful for small companies and micro-entities.
7The FRC plans to issue separate educational material on the going concern basis of accounting for small companies and micro-entities (for example, in separate factsheets or explainers).
Question 2: Different types of companies
Is the draft Guidance sufficient for the different types of company that fall within its scope, particularly for Code companies? If not, what additional guidance do you consider necessary or beneficial?
| Category of response | Number |
|---|---|
| Agreed | 4 |
| Agreed with reservations | 9 |
| Sub-total | 13 |
| Did not comment | 1 |
| Total | 14 |
8Generally, respondents agreed that the Guidance is sufficient for the different types of companies within its scope.
9The respondents with reservations were mostly of the view that additional content on related areas from the Code (such as the viability statement) should be included in the Guidance. Most of them suggested that it might be helpful to include a separate appendix within the Guidance for Code companies.
FRC response
10The FRC has added a separate appendix within the Guidance specifically for Code companies. This appendix is intended to help Code companies identify interactions between the Guidance and related areas addressed by the Code, and to locate the relevant Code guidance. It does not offer additional guidance on Code provisions.
Question 3: Overarching disclosure requirements
Do you think the guidance in Section 3 about the overarching disclosure requirements, including the requirements to report on significant judgements, assumptions and other sources of estimation uncertainty, when applicable to going concern assessments, is helpful? If not, how could it be improved?
| Category of response | Number |
|---|---|
| Agreed | 3 |
| Agreed with reservations | 10 |
| Provided other comments | 1 |
| Total | 14 |
11Most respondents welcomed the new guidance in Section 3 on the overarching disclosure requirements particularly for reporting on significant judgements, assumptions, and other sources of estimation uncertainty in relation to going concern assessments.
12Respondents also supported the inclusion of an additional reporting scenario in Section 3 in which the going concern basis of accounting is appropriate and there are no material uncertainties but reaching that conclusion involved significant judgement. Two respondents commented that it is in this scenario that directors are likely to need more guidance.
13The respondents with reservations mainly asked for more examples to be provided.
FRC response
14The FRC has made some drafting changes to Section 3 to clarify the guidance for situations in which significant judgement is involved in determining whether the going concern basis of accounting is appropriate, or whether a material uncertainty in respect of going concern exists. The guidance included in Section 5 on the factors to consider in the assessment process is also intended to help directors with the identification of events or conditions and the judgements involved.
Question 4: Assessment process
Do you have any comments on the guidance about the assessment process as set out in Section 5 of the draft Guidance?
| Category of response | Number |
|---|---|
| Supported with no comments | 5 |
| Provided comments | 8 |
| Did not comment | 1 |
| Total | 14 |
15Most respondents agreed with the guidance on the assessment process, and many welcomed the revised list of factors for directors to consider in their assessment and the different techniques that could support the assessment process.
16A number of suggestions for further improvements to the guidance were made, and three respondents commented on how the timing of the director's assessment interacts with the timing of the auditor's work.
FRC response
17The FRC made some drafting improvements to Section 5 taking into account the comments and suggestions on the assessment process.
Question 5: Proportionality
Do you think that the draft Guidance is sufficiently proportionate? If not, how can the draft Guidance be improved?
| Category of response | Number |
|---|---|
| Agreed | 3 |
| Agreed with reservations | 7 |
| Disagreed | 3 |
| Sub-total | 13 |
| Did not comment | 1 |
| Total | 14 |
18In many cases, respondents had reservations about the extent to which the Guidance provides sufficient detail to help companies identify the key factors that affect the level of assessment and amount of disclosure. Those who disagreed had similar concerns.
19Some requested more examples to illustrate how to apply proportionality in the assessment. Others requested more examples of good disclosures, noting that 'real life' examples from annual reports are helpful, such as those included in the FRC 2021 Thematic Review: Viability and Going Concern. Respondents acknowledged that the going concern assessment is clearly a matter of judgement for the directors and proportionality is a challenging aspect.
20Other comments on proportionality included suggestions to include sector-specific guidance and to have guidance for different types of companies depending on their size or the level of public interest.
FRC response
21The FRC has made some drafting improvements to the Guidance, including additional linkage between different parts of the Guidance that help directors apply proportionality.
22A small number of examples were already included in the draft Guidance to illustrate key concepts. Although there were requests for more examples in the final Guidance, the FRC believes that there is a need to strike an appropriate balance between including illustrative examples and avoiding the risk of examples being used as templates resulting in boilerplate disclosures and the 'gold-plating' of mandatory requirements through examples.
23The FRC will separately consider opportunities to publish good practice examples extracted from annual reports on going concern disclosures and related reporting.
Question 6: Other comments
Do you have any other comments on the draft Guidance?
24Respondents welcomed having a separate section on group considerations (Section 7). Some of them asked for additional guidance on going concern disclosures in group situations as they thought that Section 7 was more focused on the assessment process.
25Some respondents suggested that the definitions of liquidity and solvency risks in Section 4 be clarified.
26Other comments from respondents included points on the period of assessment and drafting suggestions on the auditor's responsibilities (Section 8), such as clearer articulation of the types of audit opinions and the auditor's duty to report to regulators.
27Some of the accountancy firms requested stronger language, and more prescriptive and more authoritative guidance. Others suggested that preparers should be held to the same expectations as auditors, citing differences between accounting standards and auditing standards.
FRC response
28The FRC made drafting improvements to Section 7 on group considerations to include additional guidance on disclosures, and clarified the descriptions of liquidity and solvency risks in Section 4 of the Guidance.
29Minor drafting changes were made in Section 3 to provide more clarity on the period of assessment and to address some of the drafting suggestions relating to Section 8 on auditor's responsibilities.
30The Guidance is framed as non-mandatory good practice guidance that supports preparers in addressing mandatory requirements (in law, regulation or standards) but encourages appropriate judgement in applying and tailoring the approach to the company's circumstances. We maintained this approach in finalising the Guidance which reflects the existing requirements or provisions of company law, accounting standards, auditing standards, listing rules, the Code and other regulation relating to reporting on the going concern basis of accounting and solvency and liquidity risks.
Appendix: List of respondents to consultation
- Headlam Group plc
- Forvis Mazars LLP
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants of Scotland (ICAS)
- The Association of Practising Accountants (APA)
- Quoted Companies Alliance (QCA)
- Ernst & Young LLP
- PricewaterhouseCoopers LLP
- haysmacintyre LLP
- Price Bailey LLP
- Association of British Insurers
- Deloitte LLP
- The Investment Association
- KPMG LLP
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