Guidance on the going concern basis of accounting and reporting on solvency and liquidity risks

News types: Guidance, Publications

Published: 18 April 2016


The Financial Reporting Council (FRC) has today issued guidance for directors of companies which brings together the requirements of company law, accounting standards, auditing standards, other regulation and existing FRC guidance relating to the going concern basis of accounting (PDF). The guidance also covers, within the context of principal risks and uncertainties disclosed in the strategic report, solvency and liquidity risks.
The guidance aims to assist directors of companies that do not apply the UK Corporate Governance Code in assessing:
  • the going concern basis of accounting, material uncertainties, solvency and liquidity risk;

  • the periods of assessment; and

  • the relevant disclosure requirements.

Clear & Concise reporting is paramount and when thinking about disclosures, directors are encouraged to consider the application of materiality in providing company-specific information. 
Melanie McLaren, Executive Director, said:

“The FRC encourages companies to take a broader longer-term view of the risks and uncertainties facing their business. We have seen an evolution in corporate reporting in recent years. The Sharman Inquiry and the Strategic Report with its forward looking-orientation have been catalysts for change and it is important for our Codes, Standards and Guidance to remain current against this backdrop.  Directors have told us that they welcome practical guidance.”   
Notes to editors
  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

  2. Read or download the Feedback statement (PDF)

  3. Small and micro companies must assess whether the going concern basis of accounting is appropriate in preparing their financial statements. However, these companies are excluded from the scope of this guidance as there are no requirements for small and micro-companies to provide disclosures on the going concern basis of accounting or prepare a strategic report. 

  4. Companies that are required or choose voluntarily to apply the UK Corporate Governance Code should refer to the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting (PDF)

  5. For further information on the strategic report, see the FRC’s Guidance on the Strategic Report (PDF).

  6. The guidance replaces the FRC ’s ‘Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009’ and ‘An Update for Directors of Companies that Adopt the Financial Reporting Standard for Smaller Entities (FRSSE): Going Concern and Financial Reporting’.    

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