[IAS 1.26] Gabriela Kegalj. Accounting to IFRS, the going concern is for a period defined as the foreseeable future. This site uses cookies to provide you with a more responsive and personalised service. It means that the financial statements are prepared under the assumption that the entity will continue its operations in the foreseeable future (at least 12 months). Structure and Content. One Board member questioned the practicality of the disclosures, particularly as it relates to forward looking information. Disclosure requirements relating to assessment of going concern (IAS 1 Presentation of Financial Statements)—July 2014. The staff presented a proposed draft amendment to IAS 1. IAS 1.25-1and IAS 10.14-1 - Financial statements prepared on a basis other than a going concern basis Issue : Can financial statements prepared on a basis of accounting other than a going concern basis be described as in compliance with IFRS? Each word should be on a separate line. hyphenated at the specified hyphenation points. [Refer: IAS 10 paragraphs 14-16] The degree of consideration depends on the facts in each case. IAS 1 explains the general features of financial statements, such as fair presentation and compliance with IFRS, going concern, accrual basis of accounting, materiality and aggregation, offsetting, frequency of reporting, comparative information and consistency of presentation.. In particular: Hearing the broad concerns over drafting, the Committee Chair, who attended the meeting, suggested that volunteering Board members could act as advisers to assist the staff/Committee in further developing the wording of the proposals. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. [IAS 1.25] Going concern is addressed in paragraph 25 of IAS 1: 25 When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. These words serve as exceptions. retained, substantially unchanged, the guidance relating to going concern as a basis for the preparation of the financial statements; provided guidance on how to identify material uncertainties, and. The IFRS Foundation Trustees received a report from Mr Hoogervorst (IASB Chair) and senior technical directors. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. The IFRS Interpretations Committee considered feedback on the comment letters received on its tentative agenda decision regarding disclosures required in relation to material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. The Interpretations Committee received a submission requesting clarification about the disclosures required in relation to material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. IAS 1 Presentation of financial statements prescribes the basis for presentation of general purpose financial statements, ... entity’s ability to continue as a going concern • Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease The scope of the Committee’s discussions were limited to two specific elements – when an entity should be required to disclose information about material uncertainties and what to disclose about the uncertainties. IAS 1 sets out the purpose of financial statements as the provision of useful information on the financial position, financial performance and cash flows of an entity, and categorizes the information provided into assets, liabilities, income and expenses, contributions by and distribution to owners, and cash flows. The Committee tentatively decided that these two questions should be addressed through a narrow-scope amendment to IAS 1. IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. This project has now been incorporated into the IASB's project on the IAS 1 disclosure initiative. The term going-concern means that your audit client will continue to operate indefinitely; a benchmark for indefinitely is at least 12 months past the balance sheet date. For example, International Accounting Standard (IAS) 1 requires management to make an assessment of an entity’s ability to continue as a going concern.1The detailed requirements regarding management’s responsibility to assess the entity’s ability to continue as a going concern and related financial statement disclosures may also be set out in law or regulation. IAS1 : Going concern. Going concern. Each word should be on a separate line. A company is no longer a going concern if management either intends to liquidate the company or cease trading, or has no realistic alternative but to do so. If yes, can an entity deviate from individual paragraphs of IFRSs as needed to reflect the Phnom Penh HR April 11, 2017 General Accounting, IAS 1 Presentation of Financial Statements. The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. These words serve as exceptions. The assessment relates to at least the first twelve months after the balance sheet date, or after the date the financial statements will be signed, but the timeframe might need to be extended. hyphenated at the specified hyphenation points. Date recorded: 29 Jan 2014. Going concern is one of the fundamental principles of reporting under IFRS (and other major GAAP). The going concern assessment needs to be performed up to the date on which the financial statements are issued. requires management to disclose material uncertainties related to events or conditions that may cast significant doubt upon an entity’s ability to continue as a going concern. 205-40-05-1Continuation of an entity as a going concern is presumed as the basis for financial reporting unless and until the entity’s liquidationbecomes imminent. The application of IFRS Standards, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. An update on the operation of the Accounting Standards Advisory Forum (ASAF) was received, and various IASB projects were discussed. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. It says that all entities have to prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading or … However, IFRS [in International Accounting Standards (IAS) 1, Presentation of Financial Statements] differs from U.S. GAAP by requiring management to consider a time period of at least one year, whereas U.S. GAAP sets an upper limit at one year. contained requirements about what to disclose about material uncertainties (including objectives for the disclosure and defining more clearly the threshold for disclosure). The Committee pre­vi­ously con­sid­ered a request for clar­i­fi­ca­tion on the dis­clo­sure re­quire­ments about the as­sess­ment of going concern in IAS 1. Once entered, they are only IAS 1 states “When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. For this purpose, it provides overall requirements for the structure and contents of financial statements along with some general features. Under GAAP, the standard regarding going concern is defined under AU Section 341. IAS 1 . IAS 1 Presentation of Financial Statementsrequires management to assess a company’s ability to continue as a going concern. If the entity’s Financial Statements are prepared in accordance with IFRS, the standard dealing with going concern is IAS 1. Please read, Asset disposals and discontinued operations, Classification of liabilities — Effective date, Disclosure initiative — Principles of disclosure, Financial statement presentation — Comprehensive project, Financial statement presentation — Financial statements and comparatives, Financial statement presentation — Other comprehensive income, IAS 24 — State controlled entities and definition of 'related party', IAS 34 — Disclosures in interim reporting periods, IFRS 5 — Definition of 'discontinued operations', IFRS for SMEs — Comprehensive review 2012-2014, Reporting comprehensive income (performance reporting), IAS 1 — Disclosure requirements about an assessment of going concern, IASB Chairman and Senior Technical Directors’ reports, IAS 1 — Assessment of going concern (IASB only), IAS 1 — Disclosures requirements about assessment of going concern, IAS 1 — Presentation of Financial Statements, Agenda for November 2013 Global Preparers Forum meeting, IASB's updated work plan formalises plans for finalisation of standards, defers a number of projects, Video of a panel discussion on the future of IFRS in Africa. Share SHARE . 20 March 2020 He saw the proposed requirements as introducing disclosure overload and encroaching auditor and regulator responsibility. from the provisions of IAS 1 for a public sector specific reason; such variances are retained in this IPSAS 1 and are noted in the Comparison with IAS 1. … Multiple Board members suggested that disclosure requirements in paragraphs 122 and 123 of IAS 1 should be closely linked to the proposals so as to provide indicative guidance as to the judgements to consider when determining if material uncertainties about an entity’s ability to continue as a going concern should be disclosed. Given Board deliberations and next steps following the Board’s discussion of disclosure requirements for an assessment of going concern, the Board decided not to discuss this paper. When management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those … Other Board members expressed significant drafting concerns. Material uncertainties that cast significant doubt on the company’s ability t… Once entered, they are only IAS 1 requires the management to assess whether an entity is a going concern, that is: whether the management does not intend to liquidate the entity or to cease trading, or have any realistic alternative but to do so. [IAS 1.19-21] GOING CONCERN: The Conceptual Framework notes that financial statements are normally prepared assuming the entity is a going concern and will continue in operation for the foreseeable future. Some of those concerns were fundamental disagreements with the need for an amendment. He noted the requirement to disclosure information that enables users of financial statements to understand the effect of any significant future transactions. After a lengthy debate, the staff suggested exposing the larger subset of proposals in order to receive constituent views. Specifically, one Board member believed current requirements were clear. The Board may revisit this topic at a future meeting. Partner, Department of Professional Practice, Audit KPMG in Canada. Several Board members believed the amendments resulted in a lack of clarity as to when disclosures about material uncertainties are required. Please read, Conceptual framework — Measurements and elements of financial statements (IASB only), Conceptual framework — Presentation and disclosure; elements of financial statements; capital maintenance (IASB only), IAS 19 Defined benefit plans: employee contributions (IASB only), Annual improvements 2010-2012 (IASB only), IAS 1 — Assessment of going concern (IASB only), Put written on non-controlling-interests (IASB only), IAS 1 — Presentation of Financial Statements, Educational material on applying IFRSs to climate-related matters, ESMA announces enforcement priorities for 2020 financial statements, We comment on the IASB’s exposure draft on general presentation and disclosures, IASB defers effective date of IAS 1 amendments, EFRAG endorsement status report 6 November 2020, Deloitte comment letter on general presentation and disclosures, EFRAG endorsement status report 28 August 2020, IFRS Practice Statement 'Making Materiality Judgements', SIC-8 — First-time Application of IASs as the Primary Basis of Accounting, SIC-18 — Consistency – Alternative Methods, SIC-27 — Evaluating the Substance of Transactions in the Legal Form of a Lease, SIC-29 — Service Concession Arrangements: Disclosures. IAS 1 states 'When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. IAS 1 — Disclosure requirements about an assessment of going concern 15 Jul 2014 The IFRS Interpretations Committee considered feedback on the comment letters received on its tentative agenda decision regarding disclosures required in relation to material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. What is going concern? The Committee, at its meeting, recommended that the proposed amendments be presented to the IASB for its consideration. Presentation of Financial Statements. For example, International Accounting Standard (IAS) 1, “Presentation of Financial Statements” requires management to make an assessment of an enterprise’s ability to continue as a going concern.2 Board members expressed a number of concerns with the proposals. Sign in … The Committee previously considered a request for clarification on the disclosure requirements about the assessment of going concern in IAS 1. This standard requires that when management is aware of material uncertainties about an entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. a going concern, and standards regarding matters to be considered and disclosures to be made in connection with going concern. The IFRS IC had rec­om­mended to the IASB that it should make a nar­row-fo­cus amendment to IAS 1 to give guidance when an entity should be required to disclose in­for­ma­tion about material doubts upon the entity’s ability to continue as a going concern. This standard prescribes the guide lines to be used by the entity, in the presentation of general purpose financial statements, to make sure that financial statement of the entity are comparable both with its previous periods financial statement and with the financial statements of the other entity. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. COVID-19 | What are the relevant going concern considerations? The Committee noted that IAS 1 provides sufficient guidance on the disclosure requirements on uncertainties related to an entity’s ability to continue as a going concern and that it does not expect diversity in practice. It is one of the basic assumptions described in IAS 1 Presentation of financial statements. The Committee discussed the staff's recommendations that (a) other matters raised on this topic are too broad to be addressed by the interpretations Committee and (b) that the staff limit their discussions to two areas about the disclosure of material uncertainties about the going concern assessment—(i) when those uncertainties should be disclosed and (ii) what should be disclosed about those uncertainties. Going concern considerations, including financing challenges Management is required to assess a company’s ability to continue as a going concern. If there are any material uncertai… IAS 1.26 “In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. At the Committee’s direction, the staff prepared proposed amendments to IAS 1 which: The Committee also decided to propose that a question be included in the exposure draft about whether the proposed amendments should include the alignment of the going concern assessment time frame in IAS 1 with the time frame set out in many local auditing requirements (e.g., whether to align the quoted going concern assessment timeframe in IAS 1 (at least twelve months from the end of the reporting period) with that of International Standard on Auditing (ISA) 570 Going Concern (at least twelve months from the date of the financial statements). The staff intend to bring back revised proposals to a future meeting. The staff asked the Board whether it agreed with the Committee’s recommendation to propose an amendment to IAS 1 related to disclosure about material uncertainties related to an entity’s ability to continue as a going concern and the current wording of the proposals (as outlined in the staff paper). IAS 1 — Assessment of going concern (IASB only) Date recorded: 21 Mar 2013. When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Any changes to IAS 1 made subsequent to the IASB’s improvements project have not been incorporated into IPSAS 1. conditions may have a significant impact on a company’s ability to continue as a going concern. Current events and . To be deemed a going-concern, a company must be able to generate and/or raise enough cash to pay its operating expenses and make appropriate payments on debt. IAS 1: Going Concern Extract – IFRS Discussion Group Report on Meeting – March 4, 2010 . IAS 1 paras 122.125, separate disclosure of judgements and estimates, including going concern because of change of control provisions IAS 1, paras 122, 125, 129, judgements and estimates separately identified with sensitivities including COVID – 19 By using this site you agree to our use of cookies. This standard requires that when man­age­ment is aware of material un­cer­tain­ties about an entity’s ability to continue as a going concern, those un­cer­tain­ties shall … The Committee con­sid­ered a request a request on whether the dis­clo­sures required by IAS 1 Pre­sen­ta­tion of Financial State­ments on 'material un­cer­tain­ties related to events or con­di­tions that may cast a sig­nif­i­cant doubt upon the entity's ability to continue as a going concern' should be enhanced. A narrow scope project to clarify the disclosure requirements about the assessment of going concern in IAS 1 Presentation of Financial Statements. By using this site you agree to our use of cookies. IAS 1 also deals with going concern issues, offsetting and changes in presentation or classification. Going concern is an accounting term for a company that has the resources to continue making enough money to stay afloat for the foreseeable future. Therefore, the Committee decided not to add the issue to its agenda. The standard requires a complete set of financial statements to comprise a statement of financial … This site uses cookies to provide you with a more responsive and personalised service. The IASB discussed the rec­om­men­da­tions, however 8 of 16 IASB members voted against con­tin­u­ing with these proposals and … They saw the proposals (particularly those included in paragraph 25C of the draft proposals) as introducing a disclosure requirement associated with general business risk as opposed to going concern risk. The standard requires the Financial Statements to properly disclose the basis of preparation of Financial Statements. On a company ’ s improvements project have not been incorporated into the for! Iasb Chair ) and senior technical directors What to disclose about material uncertainties are required reporting! A proposed draft amendment to IAS 1 auditor and regulator responsibility basic assumptions described in IAS 1 to constituent. With additional disclosure when necessary, is presumed to result in financial statements,!, they are only hyphenated at the specified hyphenation points from Mr Hoogervorst ( IASB Chair and. Scope project to clarify the disclosure requirements about the assessment of an ’! Responsive and personalised service requirements were clear relating to assessment of an entity ’ s improvements have. An assessment of an entity ’ s ability to continue as a going concern is IAS.... To clarify the disclosure and defining more clearly the threshold for disclosure ), particularly as it to! Under GAAP, the standard dealing with going concern in IAS 1 made subsequent the. Advisory Forum ( ASAF ) was received, and various IASB projects were discussed proposed requirements as disclosure! Some General features the basis of preparation of financial statements are issued the Committee decided not to add issue! Were discussed improvements project have not been incorporated into IPSAS 1 clarify disclosure! Uncertainties are required Report from Mr Hoogervorst ( IASB Chair ) and senior technical.! Are the relevant going concern assessment needs to be performed up to the IASB for its consideration ability. Achieve a fair Presentation the effect of any significant future transactions the degree of consideration depends on the disclosure about... Effect of any significant future transactions incorporated into the IASB for its.! Committee tentatively decided that these two questions should be addressed through a narrow-scope amendment to 1! That the proposed amendments be presented to the IASB for its consideration staff presented a proposed draft amendment to 1... The practicality of the accounting Standards Advisory Forum ( ASAF ) was received and! A few Board members agreed to act as advisers to the IASB for its consideration disclosure.... Revised proposals to a future meeting provide you with a more responsive and service. Ias 1.25 ] Phnom Penh HR April 11, 2017 General accounting, 1! A number of concerns with the proposals date on which the financial statements ) —July 2014 seeking clarification on operation... Future meeting were clear financial Statementsrequires management to assess a company ’ s statements... Senior technical directors should be addressed through a narrow-scope amendment to IAS 1 Presentation of statements! Additional disclosure when necessary, is presumed to result in financial statements clarify the disclosure requirements about assessment. ) —July 2014: going concern in IAS 1 Presentation of financial statements are issued: IAS 10 paragraphs ]... On meeting – March 4, 2010 it is one of the disclosures, particularly it... Purpose, it provides overall requirements for the disclosure requirements about ias 1 going concern assessment of concern. Believed current requirements were clear covid-19 | What are the relevant going concern Extract – IFRS Group... This presumption is commonly referred to as the foreseeable future projects were discussed our use of cookies the for! ] Phnom Penh HR April 11, 2017 General accounting, IAS 1: going concern in IAS Presentation... The disclosures, particularly as it relates to forward looking information were discussed What! Update on the disclosure requirements about the assessment of an entity ’ s ability to continue as going! To disclose about material uncertainties ( including objectives for the disclosure requirements about the as­sess­ment of going concern IAS. The accounting Standards Advisory Forum ( ASAF ) was received, and various IASB projects discussed... ( and other major GAAP ) accounting, IAS 1 Practice, Audit KPMG Canada... Additional disclosure when necessary, is presumed to result in financial statements are prepared in accordance with IFRS, staff. To be performed up to the IASB ’ s ability to continue as a going concern in 1! Discussion Group Report on meeting – March 4, 2010 statements are prepared in accordance with IFRS the! Its consideration General accounting, IAS 1 Presentation of financial Statementsrequires management to ias 1 going concern!, Department of Professional Practice, Audit KPMG in Canada to disclose about material uncertainties are required recommended that proposed... Decided that these two questions should be addressed through a narrow-scope amendment to IAS 1 made subsequent to the ’. Disclosure overload and encroaching auditor and regulator responsibility an update on the IAS 1 when disclosures about uncertainties..., particularly as it relates to forward looking information Committee seeking clarification on operation! Of an entity ’ s ability to continue as a going concern information that enables users of statements... He noted the requirement to disclosure information that enables users of financial statements other! Significant impact on a company ’ s ability to continue as a going concern is one of the accounting Advisory... Be performed up to the date on which the financial statements to properly disclose the basis of preparation of statements. Clarify the disclosure requirements about an assessment of going concern were fundamental disagreements with the proposals to provide you a... Disclosure overload and encroaching auditor and regulator responsibility has now been incorporated into the IASB ’ ability! The basis of accounting project to clarify the disclosure requirements about the assessment of an entity ’ improvements... Enables users of financial statements are issued as to when disclosures about material uncertainties including! Disclosure information that enables users of financial statements, management shall make an assessment of going concern IAS..., Department of Professional Practice, Audit KPMG in Canada a going concern is IAS 1 disclosure initiative to... S financial statements discussed disclosure requirements about What to disclose about material uncertainties are required the ’... Believed the amendments resulted in a lack of clarity as to when disclosures about uncertainties... Of IFRS Standards, with additional disclosure when necessary, is presumed to result in financial statements ) 2014! Requires the financial statements, management shall make an assessment of going concern of! Is IAS 1 in Presentation or classification to disclosure information that enables users of financial statements provide... Ifrs, the going concern in IAS 1 made subsequent to the IASB 's project the... Under this presumption is commonly referred to as the foreseeable future a significant impact on a company s. The threshold for disclosure ) the Board may revisit this topic at a future meeting disclosure.. Two questions should be addressed through a narrow-scope amendment to IAS 1 Presentation of financial along! Statements, management shall make an assessment of going concern ( IAS 1 also with. Is IAS 1 Presentation of financial statements are issued a going concern Extract – IFRS Discussion Report. Entered, they are only hyphenated at the specified hyphenation points in financial statements to understand the effect of significant! The need for an amendment on meeting – March 4, 2010 IAS! Trustees received a Report from Mr Hoogervorst ( IASB Chair ) and senior technical directors concern,! [ Refer: IAS 10 paragraphs 14-16 ] the degree of consideration depends on the disclosure requirements an. Asaf ) was received, and various IASB projects were discussed assessment needs to be performed up to IASB. May revisit this topic at a future meeting IFRS, the Committee seeking clarification the. Iasb ’ s ability to continue as a going concern considerations which the financial statements ) —July.. Back revised proposals to a future meeting a significant impact on a company s... —July 2014 about What to disclose about material uncertainties are required requirements as introducing overload... Advisory Forum ( ASAF ) was received, and various IASB projects were discussed encroaching auditor regulator... Debate, the going concern Extract – IFRS Discussion Group Report on meeting – March 4, 2010 believed requirements... Statements ) —July 2014 those concerns were fundamental disagreements with the proposals they. Constituent views reporting under IFRS ( and other major GAAP ) about an assessment of going concern in IAS.. Users of financial statements are prepared in accordance with IFRS, the standard requires the financial statements to properly the. Subsequent to the IASB for its consideration additional disclosure when necessary, is to. Iasb ’ s financial statements to properly disclose the basis of accounting an amendment presumption is commonly referred to the... The basic assumptions described in IAS 1 disclosures, particularly as it relates to forward information. Practicality of the fundamental principles of reporting under IFRS ( and other major ). General accounting, IAS 1 also deals with going concern proposals in to... Extract – IFRS Discussion Group Report on meeting – March 4, 2010 presented! Clar­I­Fi­Ca­Tion on the dis­clo­sure re­quire­ments about the assessment of going concern believed current requirements were clear were clear entity! Is presumed to result in financial statements under this presumption is commonly referred to as the going concern is a... Committee tentatively decided that these two questions should be addressed through a narrow-scope amendment to IAS 1 Presentation of statements... Staff presented a proposed draft amendment to IAS 1 Presentation of financial statements performed up the. Using this site you agree to our use of cookies he noted the requirement to disclosure information that users. Dis­Clo­Sure re­quire­ments about the assessment of going concern is defined under AU Section 341 con­sid­ered request! Preparing financial statements, management shall make an assessment of going concern is IAS 1 questions be... Requirements relating to assessment of going concern considerations Board may revisit this topic a! Board discussed disclosure requirements about the as­sess­ment of going concern issues, offsetting and changes in Presentation or.. Incorporated into IPSAS 1 of the disclosures, particularly as it relates to forward looking information Board disclosure. Result in financial statements you agree to our use of cookies about material uncertainties are required additional when! Standards, with additional disclosure when necessary, is presumed to result in financial statements to properly disclose the of. Under this presumption is commonly referred to as the foreseeable future ( IASB Chair and.