[NZ IAS 1]
[NZ IAS 10]
At a minimum, going concern is assessed looking out 12 months from reporting date (or, if the entity is subject to audit in New Zealand, 12 months from the date the audit report is signed).
The assessment is not just made at reporting date, but must also be (re)considered at all points in time during the period between reporting date and when the financial statements are ultimately signed (i.e. if the management determine that the entity is not a going concern during this period, the financial statements for the reporting period just ended are not prepared on a going concern basis).
When an entity is not a going concern, the financial statements are essentially presented on a “liquidation basis”, with:
- All assets and liabilities being presented as current.
- Assets remeasured to their realisable values.
- Write-downs of carried forward tax losses and other deferred tax asset balances.
- Recognition of provisions.
Accordingly, the look, feel, and measurement of assets and liabilities in the financial statements is significantly different to that when financial statements are presented on business-as-usual, going concern basis.
These areas (particularly the remeasurement of assets and recognition of provisions) may take time for an entity to address, and are not normally something that can be resolved on short notice if the going concern assumption changes just before the accounts are due to be signed.
For a large majority of entities, determination of the going concern assumption is almost certainly going to be an area of significant management judgement.
Accordingly, these entities will need to provide full, transparent, and entity-specific disclosures regarding the entities ability to continue as a going concern, and any judgements and assumptions that management have used in coming to this decision (i.e. being able to service debt facilities, shareholder support, government assistance, on-going trading etc.).
(no choice, relevant to ALL entities)