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Solvency and liquidity queries tackled in FRC going concern guidance

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NEWLY-ISSUED FRC GUIDANCE has brought together requirements of company law, accounting standards, auditing standards, other regulation and existing FRC guidance relating to the going concern basis of accounting.

The guidance also covers, within the context of principal risks and uncertainties disclosed in the strategic report, solvency and liquidity risks.

It also aims to assist directors of companies that do not apply the UK Corporate Governance Code in assessing: The going concern basis of accounting, material uncertainties, solvency and liquidity risk; The periods of assessment; and the relevant disclosure requirements.

Under the requirements, clear and concise reporting is paramount and when thinking about disclosures, directors are encouraged to consider the application of materiality in providing company-specific information.

FRC executive director Melanie McLaren said: “The FRC encourages companies to take a broader longer-term view of the risks and uncertainties facing their business. We have seen an evolution in corporate reporting in recent years. The Sharman Inquiry and the strategic report with its forward looking-orientation have been catalysts for change and it is important for our codes, standards and guidance to remain current against this backdrop. Directors have told us that they welcome practical guidance.”

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