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May 9, 2013

ACCA warns of going concern proposal complexity

The Association of Chartered Certified Accountants (ACCA) has said smaller companies may find proposed guidance on assessing and reporting going concern difficult to implement.

ACCA head of corporate governance and risk management Paul Moxey said the draft proposal, issued by the UK Financial Reporting Council (FRC), was "crucial to all companies", but that it was oriented towards companies with "specialist audit and risk committees", rather than smaller businesses without.

Moxey noted the main point of a going concern assessment was to demonstrate a company’s viability to shareholders, and to this end it would be better to see a set of good practice principles for all companies, supplemented by guidance for larger ones.

However, he warned against the risk of varied interpretations of the guidance being used to give stakeholders a false sense of security, saying it may prove so complex it could "provide a smoke screen for any negligent party in a company failure to claim that they had fully complied."

Moxey added it was important to provide uniformity in "vital financial reporting", any scope for differing interpretations could lead to such a goal being undermined.

Related articles

FRC consults on Sharman panel recommendations

Sharman panel hands down ‘going concern’ recommendations

Related links

Association of Chartered Certified Accountants

Financial Reporting Council

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