By Huw Jones

LONDON (Reuters) – A review of how Britain’s listed companies spell out their chances of surviving found assessments had too little detail to properly inform investors, the auditing watchdog said on Wednesday.

“Clear and comprehensive disclosures on these matters are particularly important given the backdrop of the COVID-19 pandemic which caused greater uncertainty for some companies,” the Financial Reporting Council said in a statement.

A lot of companies were forced to borrow money through government programs to combat the pandemic. Some industries, such as hospitality and travel, have also been severely affected by restrictions.

According to the FRC, “uncertainties which impact viability and going concern should clearly be explained to stakeholders.”

A company’s annual report usually outlines how it expects to be viable in the next 3 years. It also identifies any material uncertainties, such as difficulties paying debt repayments.

A selection of financial year reports that ended between March 2020 and December 2020 were reviewed by the watchdog.

FRC stated that the assumptions underpinning going concern disclosures sometimes did not provide enough detail to justify their conclusions.

FRC also monitors British corporate governance codes of best practices. It advised that firms extend the time they evaluate their viability, and give longer-term information when possible.

Following the corporate collapses of British builder Carillion and retailer BHS, auditing and company reporting are under severe scrutiny.

Britain suggested that businesses publish a “resilience report” which covers viability over five years, as opposed to the traditional three-year period used for going concern assessments.