Going Concern3 Dec 2024 03:37
If you see something continually posted again & again, over time you can start to think its true, when in actual fact its no nearer the truth than it was the first time you read it!
So this morning, I'm going provide everyone with some factual information, having spent some time yesterday speaking with someone who knows about AIM & Audits signoff's, clarifying as much as I possibly could around the term " Going Concern" & what it all entails etc.
I'm not going to be revealing any details around that person, but I'd like to thank them again (if they are reading this) for taking the time to answer all my questions on the matter for over an hour patiently.
There input re-affirmed my previous (ruff) understanding of the topic, but has made it much more concise.
So to meet the "Going Concern" criteria of the Auditors & the audit committee of an AIM company, the executive directors must show how the business is going to finance itself for the next 12 months & beyond with its internal projections, which should then be robustly challenged with high & low case scenarios etc.
These are projections & can turn out to be wrong in the fullness of time (a product launch is delayed, competitor decides to sell its product at a much lower price etc) are examples of what could affect the outcome considerably.
The plan should show how they would try to mitigate (even in part) against some of these outcomes.
So it is subjective & complex.
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As to the funding of the company for the next 12 month's from the date of Audit sign off, you do not need to have 12 month's of cash in the bank.
What you need to be able to do is show how your Business model will get you through the next 12 months.
The funding of it can come in multiple forms or combinations of the following:
Cash in the bank,
Cost cutting measures within the business
Revenue from sales (from internal modelling projections),
Debt borrowing or loans,
Cash injection from share placings / rights issues etc.
To clarify further it doesn't need to be limited to 1 placing/rights issue during a 12 month period it could be split into 2 or 3, (the amounts raised in previous years can add a little weight to the likely hood of you being able to achieve the figure in your 12 month plan, otherwise the auditors may push back on the number as not being realistic & it having to be lowered & others in the above list adjusted accordingly to cover the difference.
I hope all of the above explanations help everyone understand a "Going Concern" much better from now on.
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