Comments from ACCA
Thank you for the opportunity to comment on the proposed guidance on the going concern basis for directors of companies that prepare their accounts in compliance with the FRSSE. These are preliminary comments from ACCA staff given the time available.
Given the authoritative status of guidance from the FRC and the large number of companies affected, we think a public consultation would have been justified.
This guidance is for FRSSE companies. There is also FRC guidance for listed companies. We think this is an undesirable position in two ways:
- There is no guidance for the directors of unlisted companies that do not use the FRSSE
- There seems no compelling reason why the guidance should be different in principle for directors of these different categories of companies.
We would like to see general guidance issued for all sorts of companies in terms of the main factors to consider. We agree that there could be elements of the disclosures for example which would be different between different categories of companies.
We agree with the strong emphasis on cashflow in the guidance, but a reference to the desirability of other business forecasts would be useful.
It would be useful to assist directors by providing example scenarios and notes for the accounts. Directors should be encouraged to make adequate disclosure as this can only help the SME sector. FRC can clearly assist by giving examples that help demonstrate to directors and users what disclosure is expected to be adequate.
The existing guidance for listed companies is more elaborate than this FRSSE draft. The listed companies version incorporates some examples as noted above, it includes a wider list of considerations that could in principle be equally relevant to FRSSE companies – for example the sections on contingent liabilities, financial adaptability and the other assessment factors. The appendix of detailed procedures contains guidance in greater depth than the FRSSE guidance which would nonetheless be relevant in many cases for smaller entities. While we appreciate the intention to keep the FRSSE version short and to the point, there are other aspects which should be covered more extensively.
On the question of dates of the assessment, we can see no reason why the same regime should not apply to all companies in this regard. The implication of the words on page 5 is that a cashflow forecast to the next balance sheet date would be sufficient. FRSSE companies will have longer (nine months) to file their accounts than listed companies and so the issue of dates is arguably more important. The cashflow forecast might in effect therefore be only for a 3 month period.
To support the requirement on page 7 of the draft to consider extra disclosures, it would be helpful if there were some indication to directors of the sort of things that should be covered.
On pages 6 and 7 the disclosure requirements are set out in relation to two outcomes. It would be helpful if the disclosure outcome is set out when there has been a positive conclusion that the going concern basis is appropriate.
Any guidance that is issued by FRC we will draw to our members' attention by sending out to all of those in the UK.