In the wake of its changes to the UK Corporate Governance Code, the Financial Reporting Council recently released an exposure draft setting out its proposals for revised Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks).
Once ready, the new Guidance will apply to the armada of companies within its scope but not to ‘small companies’ or ‘micro-entities’.
The (non-mandatory) Guidance provides directors with a ship’s compass for:
- assessing and making disclosures about the going concern basis of accounting and material uncertainties in their financial statements; and
- disclosing principal risks and uncertainties in strategic reports.
The Guidance also encourages directors to look beyond the horizon when assessing solvency and liquidity risks and making plans to navigate these risks.
The Guidance updates the Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks (2016) to include companies applying the UK Corporate Governance Code, reflect recent developments in accounting and auditing standards and to provide additional guidance (such as techniques and practical examples) supporting the assessment and disclosure process.
The Financial Reporting Council is requesting comments by 28 October 2024.
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