The FRC has issued a consultation paper on implementation of the recommendations made by the Sharman Panel of Inquiry into Going concern and liquidity risks: lessons for companies and auditors. Under the proposals the Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009 will be replaced by new Guidance on Going Concern 2013, a new Supplement for Banks, and corresponding changes to International Standards on Auditing (UK and Ireland).

The 2009 Guidance was primarily designed to support annual and, where relevant, interim reporting. The draft 2013 Guidance calls for going concern assessment to be integrated within the processes for setting strategy, running the business, and managing risks, including an assessment of the sustainability of the business model in the longer term and the company’s adaptability in the face of economic and financial stress.

The proposed effective date for the new Guidance is periods commencing on or after 1 October 2012 with early adoption encouraged, and will apply to half year reporting when finalised.  For many companies, this period will already have started and boards may need to make transitional disclosures explaining how their processes have changed during the period to align with the proposals.

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