FRC issues going concern guidance for non-Code companies 1

Last month the Financial Reporting Council (FRC) issued Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks: guidance for companies that do not apply the UK Corporate Governance Code.

The new guidance is non-mandatory. It replaces the FRC’s:
• Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009; and
• An Update for Directors of Companies that Adopt the Financial Reporting Standard for Smaller Entities (FRSSE): Going Concern and Financial Reporting.

Why has new guidance been issued?

In 2014 the FRC published an updated UK Corporate Governance Code (‘the Code’) and related guidance on going concern for companies applying the Code. At the time, the FRC noted its intention to issue separate and simplified guidance for companies that do not apply the Code. A draft version of the simplified guidance was issued for comment in 2015. A copy of ICAEW’s comments on the draft can be found here.

Having considered the feedback received on the draft, the FRC has now issued the final going concern guidance for non-Code companies.

What is its purpose?

The guidance consolidates existing requirements (including those in company law and accounting and auditing standards) on the reporting of the going concern basis of accounting, liquidity risk and solvency risk. It is intended to provide best practice and proportionate guidance for directors of non-Code companies when applying these various requirements.

In particular, the guidance aims to assist directors with:
• the factors to consider when determining the going concern basis of accounting, material uncertainties, solvency and liquidity risk;
• the periods of assessment; and
• the relevant disclosure requirements.

There is also a section outlining the auditor’s responsibilities regarding going concern. 

What is the scope of the guidance?

The guidance is designed for the directors of larger companies that do not apply the Code. Therefore any companies that apply the Code are outside the scope of the guidance, as are small and micro entities. However, the guidance highlights certain sections which small and micro entities may find useful to refer to, for example, the section on the assessment of the appropriateness of the going concern basis of accounting.

The Financial Reporting Faculty would welcome any thoughts or comments on this new guidance. These can be emailed to

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