FRS 102 update: New going concern rules demand greater transparency

The amendments to FRS 102 issued by the Financial Reporting Council (FRC) will take effect for financial periods beginning on or after 1 January 2026. Designed to bring FRS 102 into closer alignment with IFRS, the updates impact the framework for financial reporting across a number of areas.

This guide addresses the enhanced requirements that apply to going concern disclosures. Although the changes are incremental (often relegated to the "Other Amendments" section in some guides) rather than the more fundamental changes to revenue recognition and lease accounting, there are important consequences for businesses nonetheless.

In short, businesses must now explicitly state their use of the going concern basis of accounting and disclose the judgements that informed those assessments.

Since the ultimate goal of FRS 102 amendments is to bring greater transparency and consistency, management must rise to the challenge with more detailed information about material uncertainties and their business viability assessment.

Bitesize briefing

• Mandatory disclosures updated: Businesses must confirm going concern basis and disclose key judgements.
• Material uncertainties explained: Any uncertainties affecting business viability must be clearly described.
• 12-month review required: Going concern assessments must cover at least 12 months from account approval.
• Preparation advised: Strengthen forecasting, document assumptions, and flag funding gaps or liquidity pressures early.

The key changes to going concern disclosure

• Businesses must confirm explicitly that the financial statements are prepared on a going concern basis.
• Any material uncertainties identified during the assessment must be described clearly.
• Businesses must ensure that the review covers at least 12 months from the date accounts are approved.

Despite the emphasis on what businesses “must” now do, not all measures are compulsory. Nevertheless, providing transparent, well-supported disclosures is expected as standard practice.

Mandatory or non-mandatory?

The amendments to Section 3 of FRS 102 are mandatory for accounting periods beginning on or after 1 January 2026 (with early adoption permitted). These amendments establish the minimum disclosure requirements for going concern assessments.

Separately, the FRC’s accompanying 2025 Guidance on the Going Concern Basis of Accounting and Related Reporting (pdf) is non-mandatory.

It offers best-practice recommendations, particularly the four scenarios outlined below, and its relevance depends on an entity’s size, complexity, and risk profile.

Small and micro-entities remain largely unaffected beyond their existing statutory obligations, which already meet the FRS102 minimum.

Four scenarios for going concern disclosure

The FRC has introduced a clearer framework for how businesses should approach going concern disclosures under the updated FRS102.

For the first time, the guidance sets out four possible scenarios for reporting. Going concern basis applies in three of them, but does not in one.

The most eye-catching update is the addition of a scenario where management determines that the business is a going concern without material uncertainties, but only after significant judgement. This is in clear alignment with recent IFRS developments and again reflects the FRC’s emphasis on transparency in judgment.

The four scenarios and their disclosure expectations

1. Going concern basis is appropriate and no material uncertainties.

Disclosure requirements: Confirm that the financial statements are prepared on a going-concern basis and disclose the basis of preparation. Add any further explanation needed for a true and fair view or to highlight key judgements.

2. Going-concern basis is appropriate, and no material uncertainties, but significant judgement was required.

Disclosure requirements: Confirm the going-concern basis, and explain the critical judgements and assumptions made in reaching that conclusion.

3. Going-concern basis is appropriate but material uncertainties exist.

Disclosure requirements: Confirm the basis of preparation and set out the uncertainties that may cast doubt on the entity’s ability to continue as a going concern.

4. Going-concern basis is not appropriate.

Disclosure requirements: Explain that the financial statements are not prepared on a going-concern basis, outline the reasons, and describe the alternative basis used.

In practice, these scenarios will reshape management’s interaction with auditors and lenders. For businesses that have historically relied on short-term forecasting, more robust models and documentation will be required to support their conclusions.

In turn, boards and audit committees should expect greater scrutiny of key assumptions by auditors and regulators, particularly around liquidity and refinancing risks.

Even at this late stage in the reporting cycle, many businesses are still unprepared for the heightened expectations on transparency. If in doubt, seek professional financial advice urgently.

Financial position and reserves

Where an entity has low or negative net assets, management must explain how it remains a going concern and what assumptions support that conclusion.

If management no longer intends for the business to continue trading or concludes that the going concern basis is no longer appropriate, the financial statements must be prepared on an alternative basis.

What you should do now

To prepare for the updated financial reporting requirements, businesses should now fortify their forecasting and documentation:

1. Strengthen forecasting to ensure projections covering at least 12 months.
2. Fully document the assumptions behind the going concern assessment.
3. Flag any funding gaps, working capital pressures, or material uncertainties early.
4. Review capital and liquidity planning to support an explanation of how the business intends to remain a going concern with zero reserves or negative net assets, if appropriate.
5. Tighten record-keeping and data accuracy.

In other words, prepare early so that next year’s disclosures are clear, compliant, and defensible.  

How Crowe can help

With limited time available to address an enhanced set of FRS 102 amendments, businesses should not hesitate to seek professional advice to assess financial forecasts and going-concern evaluations. Experienced professional support reaps dividends, and with over 80 years of experience in advisory and accounting services in Ireland, Crowe is uniquely positioned to support you. Engage now with our professional advisors to complete any last-minute preparations for the new requirements. Contact us today to make sure you and your business are fully prepared.