Published 12 May 2020

The Financial Reporting Council (FRC) says that directors will need to exercise judgment about the nature and extent of the procedures that they apply to assess the going concern assumption at the half‐yearly date. This might include disclosures of:

• any material uncertainties to going concern
• assumptions made about the future path of Covid-19 and the public health responses
• the projected impact on business activities
• use of government support measures
• access to bank and other financing

Issues which might trigger a need to re‐examine the going concern assumption and going concern and liquidity risk disclosures include:

• a significant adverse variation in operating cash flows between prior budgets and forecasts and the outturn in the first half of the year;
• a significant reduction in projected revenues for the second half of the year based on plausible scenarios for the Covid-19 pandemic and public health responses, and taking into account government support measures;
• a failure to obtain renewal or extension of committed financing facilities, and;
• a failure to sell capital assets for their expected amounts or within previously forecast time‐frames.

If going concern has become a significant issue since the previous annual financial statements, directors should undertake procedures similar to those that they would have carried out for annual financial statements to ensure that all relevant issues have been identified and considered.

It is a matter for a company to decide whether to engage their auditors to perform an interim review engagement – it is not a legal or regulatory requirement. However, feedback we have received from investors indicates that such a review provides valuable assurance, and this may be particularly so in the current environment.