COVID-19: Understanding the Going Concern Assessment Process
A comprehensive guide to events and considerations essential to preparing financial statements under going concern assumptions.
Uncertainty surrounding the short-term and long-term financial and economic impacts of the coronavirus pandemic has exacerbated the need for a detailed forecast to evidence an entity’s ability to continue as a going concern for at least a year from the date the financial statements are issued. The current uncertainty has not only resulted in additional management consideration to the going concern assessment, but has also increased auditor focus in this area. A consequence of the increased attention to the going concern assessment is the need for a more detailed financial forecast that indicates whether sufficient liquidity exists to continue to meet obligations when they are due, for at least one year from the date the financial statements are available to be issued. Management may be required to develop plans to address any shortfalls in required liquidity and outline the entity’s approach to increase cash flows to meet its obligations.
Whether a company has been slightly or significantly impacted by the recent outbreak, the current economic climate requires the forecasted financial health of the company be disclosed to shareholders and investors. The considerations surrounding COVID-19 are unique and therefore present unique forecasting and assessment challenges. Riveron’s COVID-19 Going Concern Assessment Guide serves as a practical tool to aid companies in identifying events and conditions, understanding forecasting considerations, and preparing for audit requirements associated with the going concern assessment.