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Nematrian Reference Library

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Introduction "In January 2013 the FRC consulted on how best to implement Lord Sharman's proposals on going concern, published in 2012. It announced at the same time that it intended to consult on an updated version of ‘Internal Control: Guidance to Directors’ (often referred to as the “Turnbull Guidance”), which was last updated in 2005. In light of the responses to the January consultation, the FRC announced in June that it was considering a different approach, which would aim to: - make a clearer distinction between the meaning of going concern in the broad context meant by Lord Sharman and how it was used in accounting standards. The feedback highlighted that using the phrase “going concern” to describe both the specific assessment required when preparing the financial statements, and the broader assessment of the risks affecting a company’s viability, was confusing; and - make a clearer link between the assessment of business viability risks and the broader risk assessment that should form part of a company’s normal risk management and reporting processes. The FRC has concluded that the best way to address these issues is to integrate its current guidance on going concern and risk management and internal control, and to make some associated revisions to the UK Corporate Governance Code (“the Code”). This consultation seeks views on the proposed approach and the draft revisions to the Code and guidance. The intended audience for this guidance is companies that apply the Code, either because they are required to (for example, companies with a premium listing of equity shares in the UK) or choose to do so voluntarily."

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