When assessing whether the going concern basis of preparation is appropriate, IAS 1 requires management to take into account all available information about the future, covering a period of at least how long from the end of the reporting period, with a longer period considered if circumstances warrant?
- Twelve months
- Six months
- Eighteen months, matching the period commonly used for liquidity risk maturity analysis under IFRS 7
- There is no minimum period specified; management may use whatever period it judges appropriate
Why A? And why not the others?
Correct answer: A. Twelve months
IAS 1 requires management's going concern assessment to look forward at least twelve months from the end of the reporting period, and this is a floor rather than a ceiling — the standard expects management to extend the assessment further when facts and circumstances, such as heightened economic uncertainty, indicate that a longer horizon is needed to properly evaluate the entity's ability to continue as a going concern. Six months falls short of the minimum period the standard actually specifies. Eighteen months confuses this requirement with a different disclosure obligation — the liquidity risk maturity analysis under IFRS 7 — which serves a different purpose and is not the going concern assessment period set out in IAS 1. The option claiming there is no minimum period ignores the explicit twelve-month floor; management has discretion to look further ahead when warranted, but not to use a shorter period or treat the requirement as entirely open-ended.
Source: IAS 1 Presentation of Financial Statements, paragraph 26 (going concern assessment period)