ACCA’s new factsheet helps preparers, trustees and their independent examiners
As an issue, going concern has grown in prominence with the impact of the Covid-19 pandemic and the subsequent difficult economic situation of low growth and high inflation culminating in a ‘cost of living crisis’ that has placed new demands and added financial pressure on the charity sector in the UK.
Accounts come to prominence when a charity suddenly collapses and, following the Public Administration and Constitutional Affairs Committee’s report on Kids Company (2016), the Charity Commission for England and Wales’ response included updating the directions for independent examination to specifically cover going concern. This factsheet explores the implications for the examiner and their duty to report to the Charity Regulator respecting the differences across the UK and Ireland.
Accounting Standard FRS102 presumes a reporting entity is a going concern and so does the Charities Statement of Recommended Practice (SORP) that applies this standard. So, when preparing the statutory accounts, trustees and those helping them either confirm the charity is a going concern, disclosing any material uncertainties as needed, or they need to develop their own alternate approach.
The factsheet uses four illustrative scenarios to explore what an alternate approach might be for each and gives advice on the impact on accounts preparation and disclosure. Irish charities do not currently have to follow the SORP, but the factsheet may still be a useful source of ideas. Ultimately the circumstances of a charity determine its approach and this factsheet offers a starting point.
Nigel Davies FCCA – member of the ACCA Charity Trustees’ Panel