Under IFRS 18: Going Concern / Accrual Basis — What Actually Changed?

A Brief Guide for Accountants

Not every change arising from IFRS 18 means a change in accounting.

Unlike the new P&L structure, Management-Defined Performance Measures and enhanced aggregation and disaggregation requirements, the fundamental principles of Going Concern and Accrual Basis Accounting remain largely unchanged.

The important development is structural.

As IFRS 18 replaces IAS 1, foundational requirements relating to the basis of preparation of financial statements, including Going Concern and Accrual Basis Accounting, are relocated to IAS 8, Basis of Preparation of Financial Statements.

For accountants, the message is therefore:

Do not change the accounting principle. Update where you look for the requirement—and make sure your assessment, documentation and disclosures remain robust.

IAS 1 vs IFRS 18 / IAS 8 — What Changed?

So, what is the real change?

• Accounting principle → No fundamental change
• Assessment → No fundamental change
• Accounting outcome → No fundamental change
• Location in IFRS literature → Changed
• Internal references and templates → Need updating

Going Concern: The Accountant’s Responsibility Remains

Financial statements are prepared on a going concern basis unless management intends to liquidate the entity or cease trading, or has no realistic alternative but to do so.

The accountant must therefore continue to support management’s assessment, and the relocation of the requirement does not lessen the significance of that assessment.

Example 1 — A Healthy Entity

Assume a manufacturing company has:

Cash: $25 million
Current ratio: 2.5
Operating cash flows: Positive
Credit facility: Available

What changed?

The reference changed. The conclusion did not.

The accountant should therefore avoid interpreting IFRS 18 as requiring a new going concern accounting methodology.

Example 2 — Financial Distress

Now assume the entity has:

• negative operating cash flows;
• loss of a major customer;
• a loan covenant breach; and
• significant debt maturing within six months.

IAS 1 vs IFRS 18 / IAS 8

The accountant’s work therefore remains centered on the quality of the evidence supporting management’s conclusion.

What Should the Going Concern File Contain?

A robust accounting file should include:

• Management conclusion
• Cash-flow forecast
• Key assumptions
• Liquidity assessment
• Debt maturities & covenants
• Available financing
• Management mitigation plans
• Going concern disclosure assessment

The accountant should be able to demonstrate not simply that management concluded the entity is a going concern, but why that conclusion is supportable.

Disclosure Must Reflect the Entity’s Actual Situation

A generic statement such as “Management believes the entity will continue as a going concern” may not be sufficient where significant liquidity pressures or uncertainties exist.

Where relevant, the disclosure should explain the actual circumstances, including the uncertainties and management’s response.

For example:

The objective is not to produce a more optimistic disclosure.

It is to produce a transparent and supportable disclosure consistent with management’s actual assessment.

What About Accrual Accounting?

Here too, the principle has not fundamentally changed.

Transactions and events continue to be recognized in accordance with the applicable IFRS Accounting Standards when they occur—not simply when the related cash is received or paid.

Consider a Consulting service Example

Service performed: December 2026
Revenue: $100,000
Customer pays: March 2027

Accounting outcome: No change.

Accrual Basis Still Means Getting the Period Right

For accountants, accrual accounting continues to require proper attention to:

• Revenue cut-off
• Expense accruals
• Unrecorded liabilities
• Prepayments
• Receivables
• Employee costs
• Interest accruals
• Goods and services received before invoicing

The fact that IFRS 18 reorganizes where the principle sits in the IFRS literature does not change these year-end responsibilities.

What Should Accountants Actually Change?

Although the accounting principles remain substantially the same, several practical updates may be necessary.

1. Update IFRS References: Accounting manuals and checklists may currently state “In accordance with IAS 1…” Those references should be reviewed where the relevant requirements have moved to IAS 8.
2. Update Financial Statement Templates: Review standard financial statement templates and internal guidance for outdated IAS 1 references.
3. Maintain Strong Going Concern Documentation: Continue documenting.

4. Make Disclosures Entity-Specific: Where going concern issues exist, avoid relying solely on generic wording.
5. Keep Accrual Controls Strong: Continue ensuring that transactions are recognized in the correct reporting period regardless of when cash moves.

Accountant Readiness Checklist

Before IFRS 18 becomes effective:

• Identify internal manuals and templates referring to IAS 1 for going concern or accrual basis.
• Update references where requirements have moved to IAS 8.
• Confirm the going concern assessment is formally documented.
• Refresh cash-flow forecasts and supporting assumptions.
• Review debt maturities, covenant compliance and financing availability.
• Ensure management mitigation plans are realistic and supported.
• Prepare entity-specific disclosures where uncertainties exist.
• Review year-end cut-off and accrual procedures.
• Confirm accruals, prepayments and unrecorded liabilities are complete.
• Ensure the going concern conclusion is consistent with the rest of the financial statements.

The Key Message

For Going Concern and Accrual Basis Accounting, IFRS 18 is mainly a change in the architecture of the Standards, not the underlying accounting principles.

Going Concern

Same assessment → Same evidence → Same fundamental principle → New location

Accrual Basis

Same recognition discipline → Same accounting outcome → New location

For accountants, the priority should therefore not be to redesign the accounting. It should be to update the references, preserve the discipline, strengthen the documentation and ensure the financial statements reflect the entity’s actual circumstances.