The FRC consulted on how best to implement Lord Sharman's proposals on going concern. It is pleased with the considered feedback to its CP, 'Implementing the Recommendations of the Sharman Panel – Revised Guidance on Going Concern and revised International Standards on Auditing (UK and Ireland)'.
The majority of respondents supported the principles behind the recommendations advocated by Lord Sharman’s report, “Going Concern and Liquidity Risks: Lessons For Companies and Auditors”. The FRC therefore encourages all companies to consider and abide by the principles.
In terms of the development of guidance in support of the principles the FRC has decided to take up a number of proposals and will:
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Issue separate, simplified guidance for SMEs. As was anticipated in the consultation questions, feedback has been that recommendations for SMEs could be more proportionate.
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Make a clearer distinction as to the meaning of going concern in the context meant by the Sharman panel. The feedback highlighted that the use of going concern to describe both the specific assessment required when preparing the financial statements, and the broader assessment of the risks affecting a company’s viability, was confusing. The FRC will consult on whether changes to the UK Corporate Governance Code are needed to make the distinction clearer; if so, they will take effect in October 2014.
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Make a clearer link between the assessment of business viability risks and the broader risk assessment that should form part of a company’s normal risk management and reporting processes. The FRC will consider this in the development of the Code and related guidance on risk management and internal control.
Press release
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