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Guidance on going concern assessment amid COVID-19

Guidance on going concern assessment amid COVID-19

In this issue of First Notes, we aim to provide an overview of the specific matters to be considered by the management while assessing going concern in current times as per the guidance issued by IAASB and ICAI.

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Background

Section 134(5) of the Companies Act, 2013 requires board of directors of every company to state in its Directors’ Responsibility Statement that they have prepared the annual accounts on a going concern basis.

Given the economic uncertainty created by the novel coronavirus (COVID-19) coupled with significant business disruptions for entities across almost all sectors, there is likely to be an increase in events and circumstances which may cast significant doubt on an entity’s ability to continue as a going concern. Therefore, management may need to assess whether going concern assumption is still appropriate as a basis for the preparation of the company’s financial statements.

Recently, the International Accounting and Auditing Standards Board (IAASB) and the Institute of Chartered Accountants of India (ICAI) have issued guidance on going concern assessment amid COVID-19 by management and considerations for an auditor while evaluating the management’s assessment.

In this issue of First Notes, we aim to provide an overview of the specific matters to be considered by the management while assessing going concern in current times as per the guidance issued by IAASB and ICAI.

To access the text of the guidance issued by IAASB, please click here.

To access the text of the guidance issued by ICAI, please click here.

© 2020 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

KPMG (Registered) (a partnership firm with Registration No. BA- 62445) converted into KPMG Assurance and Consulting Services LLP (a Limited Liability partnership firm) with LLP Registration No. AAT-0367 with effect from July 23, 2020.

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