FRC publishes review findings on companies viability and going concern disclosures
22 September 2021
The Financial Reporting Council (FRC) has today published the findings of its review of companies’ viability and going concern disclosures
which found there were several areas where viability and going concern reporting could be improved.
Clear and comprehensive disclosures on these matters are particularly important given the backdrop of the Covid-19 pandemic which caused greater uncertainty for some companies. Uncertainties that impact viability or going concern should be clearly explained to stakeholders.
In particular, the review found that:
- the disclosure of inputs and assumptions used in forecast scenarios to support the viability and going concern assessments often lacked sufficient qualitative and quantitative detail; and
- in some cases, there was evidence to indicate that significant judgements may have been applied in determining whether a company was a going concern or whether this was subject to material uncertainty, but these judgements were not identified or explained.
As well as making improvements in these areas the FRC encourages companies to extend the period over which they assess their viability and provide longer term information where possible. Companies should also maintain a focus on providing more informative company specific disclosure which is clear and concise and avoids unnecessary clutter.
The FRC’s Executive Director of Regulatory Standards, Mark Babington said:
“High-quality viability and going concern disclosures are vital for investors and other users of accounts to help them make informed decisions about a company’s liquidity, solvency and longer-term viability. This is particularly important during times of uncertainty and economic volatility.
Companies should carefully consider the review findings with a view to improving their viability and going concern disclosures in their upcoming annual reports and accounts.”
The full review is available here