The Financial Reporting Council (FRC) has warned that executives must pay more attention to the risks disclosed in their accounts this year, due to the difficult market conditions that have left many companies close to liquidity problems. JJB Sports, Woolworths (to which administrators have now been appointed) and Taylor Wimpey have all recently reported “material uncertainties that may cast significant doubt” on their ability to remain a going concern. Although such a disclosure does not mean that a company can no longer continue trading, it does serve to warn of problems in the future.
The FRC has already identified goodwill accounting as a particular area of concern. Companies must write off some goodwill if the acquisition is thought to have permanently fallen in value. It is expected that a full report will soon be issued on this topic.