FRC issues ‘going concern’ update for small biz

The FRC has taken steps to head off a deluge of businesses issuing going
concern warnings by releasing an update to the standards governing small

The regulator stressed the Financial Reporting Standard for Smaller Entities
update was issued as guidance and would not put small companies under a heavier
reporting workload.

The FRC said: ‘The effect of current market conditions on individual entities
requires careful evaluation. However, it should not be assumed that the general
economic situation at the present time of itself means that a material
uncertainty exists about a company’s ability to continue as a going concern.’

However, the FRC stressed that companies use of the going concern basis of
accounting involved making judgments, at a particular point in time, about
future events which ‘are inherently uncertain. Those judgments are valid only at
the date of approval of the annual accounts.’

‘The fact that directors prepare accounts on a going concern basis is not
intended to and does not guarantee that a company will continue in existence
until the next annual accounts are published or even until the next balance
sheet date.’

Related reading

Fiona Westwood of Smith and Williamson.