Company directors will conduct analysis, make disclosures. CREATIVE COMMONS
Going concern assumption is applied in cases where a company faces difficult financial, economic or operating conditions that may endanger its existence, the SECP said in a statement on Saturday.
The directors are required to perform a comprehensive circumstantial analysis of the company and make appropriate disclosures in financial statements to enable shareholders to make informed decisions about their investment, it said.
“It is a fundamental accounting principle used in preparation of financial statements that implies that a company will continue in business for a foreseeable future,” it said.
It has been noted over the years that going concern reporting is not given due attention by the companies and at times even by their auditor. In this context, it was considered necessary to issue these guidelines, the statement said.
The guidelines are the compilation of presently applicable requirements of the Companies Ordinance 1984. The objective is to assist companies’ management/directors in making assessment of going concern assumption as a basis of accounts preparation and to make appropriate reporting in the financial statements, leading to optimum financial statement transparency.
Major areas covered by the guidelines include responsibilities of directors in carrying out going concern assessment, requisite disclosures under different financial reporting frameworks, documentation requirements, auditor’s responsibilities while evaluating directors’ assessment, different kinds of audit opinions and basis of preparation of accounts on other than going concern basis.
Published in The Express Tribune, November 15th, 2015.
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