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Close call going concern assessments

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Jan 25, 2021

On January 25, 2021, the Accounting Standards Board (AcSB) and Auditing and Assurance Standards Board (AASB) issued this joint resource on accounting and auditing considerations relating to close call going concern assessments.

Did you conclude that your company did not have material uncertainties associated with its ability to continue as a going concern? Would small changes to the assumptions you used change that assessment?

COVID-19 continues to impact Canada and the world. Some companies have closed or experienced declines in their operations, which may cast significant doubt on their ability to continue as a going concern. When preparing their financial statements, management needs to assess whether there are material uncertainties about the company’s ability to continue as a going concern. This assessment will involve the use of judgment and numerous assumptions to support management’s conclusion.

Sometimes management’s current assumptions may result in the determination that there are no material uncertainties that the company will continue as a going concern. However, small changes to these assumptions may give rise to the determination that there are material uncertainties. In these situations, management should consider the disclosure requirements in paragraph IAS 1.122 associated with the judgments used when preparing the company’s going concern assessment.

If the financial statements are subject to audit, the auditor will need to consider the adequacy of disclosures included in the financial statements and the audit reporting implications.

Review the press release and resource on the AcSB's website.

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