Corporate reporting - going concern and the treasurer in a downturn

1 December 2008
Updated 16 December 2008

Treasurers’ attention is drawn to important new papers from the Financial Reporting Council and the Auditing Practices Board

They cover the various requirements for companies in considering necessary disclosures related to the current economic downturn, and whether accounts can be published on a going concern basis (perhaps with extended wording drawing particular attention to certain matters) or not. The general state of the business and its cashflows are important here but also the availability of finance. Treasurers should be well prepared and have a major input into discussions with the Board, audit committee and auditors in respect of both cashflow forecasts and the availability of finance.

The FRC press release is available from www.frc.org.uk/press/pub1781.html, and the two relevant papers, Challenges for Audit Committees arising from current economic conditions and An Update for Directors of Listed Companies: Going Concern and Liquidity Risk are accessible from that page.

Since the FRC’s publication of these papers, the Auditing Practices Board has issued guidance on the same topic to auditors and treasurers will find it useful to be familiar with that guidance. The APB guidance is available at http://www.frc.org.uk/apb/publications/pub1824.html.

Treasurers should check loan and bond covenants, and requirements for representations and warranties to ensure that any extended audit report will not raise problems.