Going concern inquiry closed for submissions
The FRC's inquiry into going concern has closed and ACCA said while IFRS are fit for purpose, the time frame under consideration should be extended
THE FINANCIAL Reporting Council’s inquiry into going concern and liquidity risks has closed for submissions.
Known as the Sharman Inquiry, it grew out of fears thrown up by the financial crisis, when auditors where signing off companies as going concerns despite severe liquidity problems.
ACCA said international financial reporting standards “are more than adequate to assess a company’s going concern and liquidity risks”, but called for an extension to the future period under consideration.
Head of financial reporting Richard Martin said: “The key weakness of IFRS in the area of going concern is that the minimum look-forward period is 12 months from the balance sheet date and not 12 months from the date of approval – as in the UK regime. This is all the more significant given that there is no maximum period in IFRS after the period-end for reporting. Making this change would bring other countries up to the standard of the UK’s more demanding but more realistic test.”
Stakeholders had until 30 June to respond, and the FRC is aiming to publish preliminary conclusions in the summer, followed by final recommendations at the end of the year.