FRC: Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks)

On 25 February 2025, the Financial Reporting Council (FRC) published updated 'Guidance on the Going Concern Basis of Accounting and Related Reporting, including Solvency and Liquidity Risks' (Guidance). This provides guidance on the going concern basis of accounting for all companies, including those that apply the UK Corporate Governance Code, as well as guidance on the reporting of solvency and liquidity risks.

The Guidance is non-mandatory and is intended to serve as a proportionate and practical guide for directors of all UK companies within its scope to assist them with the application of the applicable legal and regulatory requirements to:

• assess and make disclosures related to the going concern basis of accounting and any material uncertainties in their financial statements; and
• disclose principal risks and uncertainties, which may include risks that might impact solvency and liquidity, within their strategic report.

Last published in 2016, the updated Guidance brings together the requirements and provisions of company law, accounting standards, auditing standards, listing rules, the UK Corporate Governance Code and other regulation relating to reporting on the going concern basis of accounting and solvency and liquidity risks. It replaces the 2016 guidance which has been withdrawn and follows a consultation on a draft of the Guidance published in August 2024.

Key changes from the 2016 guidance include the following:

• Companies applying the UK Corporate Governance Code are included within the scope of the Guidance, so that the Guidance applies to all UK companies except small companies and micro-entities. The Guidance includes a table which sets out the requirements for each type of company, highlighting the sections of the Guidance that may assist directors in meeting those requirements. It includes small companies and micro-entities and notes that directors of small companies and micro-entities may find the specific guidance paragraphs referenced in the table helpful in identifying and applying the requirements applicable to them.
• It reflects changes in accounting standards and auditing standards.
• The Guidance provides additional guidance on overarching disclosure requirements, especially in situations when significant judgement was involved in the assessment of the appropriateness of the going concern basis of accounting or the conclusion that there are no material uncertainties.
• It provides (primarily in Section 5) additional guidance on techniques that could support the directors’ assessment process.

The FRC has also published a shorter Explainer document with the Guidance.

(FRC, Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks), 25.02.2025)

DBT: FTSE Women Leaders Review – Achieving Gender Balance

On 25 February 2025, the Department for Business and Trade (DBT) announced the publication of the latest FTSE Women Leaders Review report which reports on the progress by FTSE 350 companies and the 50 largest UK private companies in increasing women in senior leadership positions and on their boards. This builds on the earlier work of the Davies Review and the Hampton-Alexander Review.

Key developments to note include the following:

• FTSE 350 boards and FTSE 350 leadership teams were set a target of 40% women’s representation by the end of 2025. As at 10 January 2025, the FTSE 350 reported a year-on-year increase with women holding 43% of board roles (44.7% for the FTSE 100 and 42.6% for the FTSE 250). The proportion of women on private company boards was 31%.
• The FTSE 350 have 16% women executive directors and 50% women non-executive directors. The 50 private companies have 29% women executive directors and 33% women non-executive directors. This reflects the lower representation of women non-executive directors on the 50 private companies’ boards at 33%, compared to the 50% non-executive directors on FTSE 350 boards.
• The target for women in leadership positions is 40%. The FTSE 100 has 36.6% overall women in leadership (32.7% in the executive committee and 37.1% in the direct reports) The figure for the FTSE 250 is 34.2% overall (26.8% in the executive committee and 35.5% in the direct reports). Figures for the 50 largest private companies are 34.5% on executive committees and 37.1% in the direct reports.
• As far as the recommendation to appoint at least one woman in the four key roles of Chair, Senior Independent Director (SID), CEO and Finance Director (FD) by the end of 2025 is concerned, 77% of the FTSE 350 and 60% of the 50 private companies now have at least one woman in one of those roles, with the greatest progress in the SID role.

(FTSE Women Leaders Review, Achieving Gender Balance – February 2025, 25.02.2025)

(DBT, UK businesses lead the way with record numbers of female leaders, 25.02. 2025)

Companies House: ECCTA outline Transition Plan for Companies House updated

On 24 February 2025, Companies House published an update to the Transition Plan outlining the indicative timeline of Companies House for commencing the key provisions of the Economic Crime and Corporate Transparency Act 2023 (ECCTA).

Previously it had been announced that, from 25 February 2025, individuals and organisations could apply to Companies House to be registered as an Authorised Corporate Service Provider (ACSP) to authorise them to carry out identity verification and other services. That launch date has been postponed with the Transition Plan giving a “Spring 2025” date now. Companies House states that it will update the Transition Plan when a new date is confirmed.

(Companies House, ECCTA outline Transition Plan, 24.02.2025)

Risk Coalition: Raising your game - Guidance to enhance risk governance, risk-taking, resilience and reporting

On 21 February 2025, the Risk Coalition, a network of not-for-profit professional bodies and membership organisations committed to raising the standards of risk governance, published new cross-sector guidance for boards and their committees with consolidated risk responsibility (whether a dedicated risk committee or an audit and risk committee).

This guidance builds on the Risk Coalition’s previous guidance published in 2019, Raising the Bar, which focused on risk governance and oversight specifically in financial services. The new guidance is stated to be relevant to companies across all sectors, whatever their size.

The guidance sets out eight principles, to be applied proportionately, to support and enable better risk governance and more effective decision-making by boards and management. It then sets out steps under each principle that boards or audit and risk committees (as appropriate) can take to meet that principle, as well as leading practice outcomes from meeting the principle.

The principles are as follows:

• Principle 1 – Board accountability: The board has ultimate accountability for the overall effectiveness and appropriateness of the organisation’s risk management and internal control arrangements.
• Principle 2 – Committee purpose: The Committee is primarily an advisory committee to the board. Its aim should be to support focused and informed board discussions on risk-related matters, and to help executive management make better risk decisions
• Principle 3 - Committee composition and membership: The Committee should be formed of independent non-executive directors and apply relevant leading practice corporate governance guidance on composition, succession and performance evaluation criteria
• Principle 4 - The organisation’s approach to risk: The Committee should provide the board with advice as to whether the organisation’s approach to, and appetite for, risk and its wider risk management arrangements remain appropriate
• Principle 5 - Risk culture and behaviours: The Committee should consider and periodically report to the board whether the organisation’s purpose, values and risk culture expectations as defined in the board risk policy are appropriately embedded at all levels and are reflected in observed behaviours and decisions
• Principle 6 - Navigating risks and pursuing opportunities: The Committee should assess and advise the board on the likely achievement of the organisation’s strategic objectives and emerging opportunities, in the light of the principal and emerging risks attaching
• Principle 7 - Risk management, internal control systems and reporting: The Committee should monitor, periodically review and advise the board on the effectiveness, appropriateness and continued improvement of the organisation’s risk management and internal control arrangements, including the quality and completeness of material risk-related information
• Principle 8 - Independent risk oversight and challenge: Where relevant, the Committee should safeguard the independence and objectivity of the chief risk executive

(Risk Coalition, Raising your game - Guidance to enhance risk governance, risk-taking, resilience and reporting, 21.02.2025)