Corporate reporting – FRC publishes updated Going Concern guidance

The Financial Reporting Council (FRC) has published Guidance on Going Concern basis of accounting and related reporting (including solvency and liquidity risks) (Guidance), to replace its previous guidance on the topic.

The Guidance aims to help companies make assessments in relation to whether the going concern basis of accounting is appropriate and to prepare disclosures in relation to these assessments. The Guidance brings together the requirements of company law, accounting and audit standards, the UK Listing Rules, the UK Corporate Governance Code (Governance Code), and other relevant regulations in relation to going concern basis of accounting and solvency and liquidity risks.

The Guidance, application of which is not mandatory, is relevant for both Governance Code and non-Governance Code companies. It sets out:

• factors to consider when assessing the appropriateness of adopting the going concern basis of accounting and the solvency and liquidity risks;
• an explanation of the reporting requirements and how materiality is applied to these requirements;
• guidance on the assessment process, including techniques that could support that process;
• examples of how practical situations could be managed; and
• the responsibilities of the auditor in connection with the directors’ going concern assessment.