The Financial Reporting Council (FRC) has released updated guidance on the ‘going concern’ basis of accounting and related reporting, including solvency and liquidity risks.
This guidance is intended to aid companies in demonstrating the assessments that underpin their going concern conclusions.
Replacing the 2016 guidance on the same topic, the latest edition offers direction for companies adhering to The UK Corporate Governance Code as well as non-code companies.
It also includes advice on reporting solvency and liquidity risks. The 2016 guidance has now been officially withdrawn.
The new non-mandatory guidance consolidates the requirements of company law, accounting standards, auditing standards, listing rules, the UK Corporate Governance Code, and other relevant regulations.
It serves as a comprehensive and practical resource for companies of various sizes to create detailed, company-specific disclosures about their going concern conclusions.
Clarity in these disclosures is claimed to be essential for fostering investor and end-user confidence, which in turn helps companies to secure capital and contribute to the UK’s economic growth.
Incorporating recent changes in the corporate reporting framework and auditing standards, as well as evolving reporting practices, the FRC continues to emphasise the importance of high-quality reporting within annual reports.
FRC Regulatory Standards executive director Mark Babington said: “The FRC is focused on delivering proportionate guidance on both the production and usability of high-quality reporting, as it looks to support businesses’ access to capital and their contribution to UK economic growth.
“I encourage companies to make the most of this guidance to provide investors and other stakeholders with clear and coherent going concern disclosures.”
This update follows calls from The Association of Chartered Certified Accountants in the UK for the FRC to maintain strong sustainability commitments in the UK Stewardship Code.
