EY welcomes FRC re-think on going concern
6 June 2013
EY welcomes today’s announcement by the Financial Reporting Council (FRC) to revise, re-consult and seek further clarification on proposed changes to its draft guidance on going concern. We support the key principals of Lord Sharman’s recommendations and continue to believe that improving the transparency and quality of reporting about going concern, both by companies and their auditors is very important to stakeholders and rightly remains a priority for the FRC.
EY had reservations about the clarity of some of the FRC's initial proposals and how they might align with related international developments - concerns echoed during the public meeting the FRC organised to discuss its proposals.
Hywel Ball, head of assurance, UK & Ireland, at EY, comments:
“The distinction between preparing accounts on a going concern basis, and a company trading as a going concern was unclear. This could make it difficult to compare the disclosures of UK companies with their international peers. Complications might also arise when directors determine whether they have a high level of confidence about the foreseeable future of their business”.
“I am pleased the FRC responded to the feedback they received and look forward to working with them as the consultation and clarification process goes forward.”
EY canvassed the views of non-executive directors on the FRC’s draft guidance. Almost half of the respondents expressed doubts about the foreseeable future requirement, and they were divided over whether the draft revised guidance would bring any benefits to investors and other company stakeholders.