COVID-19 continues to impact Canada and the world. Some companies have closed or experienced declines in their operations, which may cast significant doubt on their ability to continue as a going concern. When preparing their financial statements, management needs to assess whether there are material uncertainties about the company’s ability to continue as a going concern. This assessment will involve the use of judgment and numerous assumptions to support management’s conclusion.
Sometimes management’s current assumptions may result in the determination that there are no material uncertainties that the company will continue as a going concern. However, small changes to these assumptions may give rise to the determination that there are material uncertainties. In these situations, management should consider the disclosure requirements in paragraph IAS 1.122 associated with the judgments used when preparing the company’s going concern assessment.
If the financial statements are subject to audit, the auditor will need to consider the adequacy of disclosures included in the financial statements and the audit reporting implications.
The AcSB and AASB have issued a joint publication to provide guidance on accounting and auditing considerations relating to these assessments.