Going concern assessment and related disclosure during the pandemic. Evidence from the “most impacted” Italian firms

During periods of crisis, companies’ accountability becomes particularly crucial; however, disclosure regulations and guidance may be ineffective to support it. This chapter aims to analyse companies’ reporting in relation to going concern (GC) assessment and related disclosure during the pandemic. To achieve this aim, it focuses on the disclosure of risks/uncertainties and mitigating actions which are the most relevant when assessing the entity’s ability to continue as a GC and the reasoning behind directors’ GC assessment. By performing a detailed content analysis of the annual reports of a sample of 101 companies listed in the Italian Stock Exchange and belonging to industries significantly affected by the pandemic, a significant lack of details regarding the reasoning behind directors’ judgements on the GC assessment was found. Results also show that the most frequently disclosed risks and mitigating actions are operational followed by financial ones. However, only a limited number of companies went beyond the simple disclosure on risks and actions and made explicit the reasoning behind GC assessment, thus, at the expenses of effective accountability. Overall, the chapter suggests a direction for future discussion about the weaknesses of financial accounting disclosure to support firms’ accountability during a crisis.