Sharman's concerned about going concern

by Gavin Hinks

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04 Nov 2011

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LORD SHARMAN's conclusions on going concern are to be applauded. The system we have has long since been problematic and not nearly nuanced enough.

In a report this week Going Concern and Liquidity Risks he concludes that the current system is too “binary” – a company is a going concern or it isn’t.

That doesn’t nearly cover all the possibilities. After all, a business may be deemed a going concern for the purposes of reporting, but may indeed face serious difficulties that stakeholders should know about. Hence the need for more information and in different forms.

A more nuanced approach should also mean that disclosures can be made without becoming the killer blow that causes a company to collapse. This is why the all or nothing approach of the current going concern regime is inadequate. The International Accounting Standards Board has to listen because accountants and company directors really do need a better system.

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