The UK Financial Reporting Council (FRC) has published a review of current companies’ viability and going concern disclosures, identifying several problem areas that need significant improvement. They are particularly important given the impact of the COVID-19 pandemic, which has added uncertainty to the long-term prospects of many UK companies.
During the study, FRC inspectors found that:
- disclosure of inputs and assumptions used in forecast scenarios often lacked sufficient qualitative and quantitative detail;
- in some cases, there was evidence that significant judgments were used in determining whether a company was a going concern, which would be acceptable if they were identified and explained in the disclosures, but sometimes this was omitted.
In addition to the need to improve disclosures, the Financial Reporting Council encourages companies to extend the period over which they assess their viability and provide loner tem information where possible. Companies should also maintain a focus on providing more informative company specific information, taking into account all the facts and circumstances, to prevent the accumulation of unnecessary boilerplate disclosures.