Over the last decade, more than half of public companies listed on Canadian exchanges received a going concern opinion annually.
The number of companies that received a going concern increased by 3.5% during FY2022 to 2,190 companies. This continues the upward trend in going concern opinions for Canadian companies seen since FY2021. Although the number of going concerns increased, the number of total opinions declined in FY2022 by 4.5%, following a subtle increase in opinions during FY2021.
The increase in going concerns and decrease in total opinions for FY2022 led to a spike in the going concern rate for Canadian public companies.
As mentioned, the going concern rate has surpassed 50% since FY2013. In FY2022, Canadian companies had a going concern rate of 57%. This represents a 4.5 percentage point increase from the prior year. The spike between FY2021 and FY2022 is the highest going concern rate increase over the ten-year period.
Changes in Going Concern Opinions
Canadian going concern opinions experienced a net increase of 98 in FY2022. Contributing to this net change was an addition of 457 new going concerns and an attrition of 359 going concern opinions between FY2021 and FY2022. While the number of total opinions decreased in FY2022, going concerns continued to see positive net gains.
Going Concern Increases
In FY2022, 65% of going concern increases came from existing companies with a new going concern. The number of companies that received a new going concern opinion spiked to 299 in FY2022. This spike represents a 103% increase from FY2021.
New companies that received a going concern in their first annual report accounted for 35% of going concern increases in FY2022. The number of new companies that received a going concern opinion declined to 135, a 47% decrease from FY2021. This coincides with the decline in total first annual reports, which also decreased by 55% in FY2022.
Existing companies who received a new going concern opinion represented nearly 14% of all going concerns in FY2022. Additionally, companies with a going concern opinion in their first annual report represented 7.2% of FY2022 going concerns. The remaining 80% of going concerns for FY2022 were companies who also had a going concern in FY2021.
Going Concern Attrition
Excluding FY2019, the leading factor of going concern attrition over the last five years were companies that improved their financial positioning. This trend reversed during FY2022, where 69% of going concern attrition came from companies that did not file an annual report following a going concern opinion in FY2021. The number of companies with no subsequent filing increased to 247 in FY2022, representing a 52% increase from the previous year.
Companies that received a clean opinion in FY2022 following a going concern in FY2021 represented 31% of the going concern attrition. The number of companies that improved their financial positioning decreased to 112 companies. This represents a 42% decline from FY2021, continuing the downward trend in going concern improvements seen since 2020.
Of all the companies that had a going concern opinion in FY2021, 11.7% had no subsequent filing in FY2022. Additionally, only 5.3% of companies that received a going concern opinion for FY2021 saw improvements that led to the clean opinion for FY2022.
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