In our latest report, Going Concerns: A Twenty-One Year Review, we examine the trends and statistics of going concerns (opinions qualified by an uncertainty regarding the going concern assumption) filed with the Securities and Exchange Commission since 2000.
Using data from our Audit Opinions database, this report takes a closer look at developments in going concern trends across company location, size, and industry. Additionally, this year’s report specifically looks at going concerns in registration statements and investment companies.
The report also provides a deeper discussion surrounding factors underlying the year-over-year trends in going concern numbers. Furthermore, an analysis of the issues cited in going concern assessments provides insights into the matters affecting the financial condition of companies over time.
Below is a snapshot of select trends from this year’s report.
Decline in going concerns. Going concern opinions hit a record low in fiscal year 2020. Only 1,261 companies (17.9%) received a going concern opinion during the year.
The percentage of companies receiving a going concern has been gradually declining since the financial crisis. But the steepness of the FY 2020 decline brought all new lows.
Changes driven by improvements. In FY 2020, more companies were able to improve their going concern opinion year-over-year than in any other year reviewed in this report.
Of all companies that received a going concern in FY 2019, 18.6% improved year-over-year and received a clean opinion in FY 2020.
Shift in trend with going concern issues. Issues related to recurring losses continued to outpace all other going concern issues by a wide margin in FY 2020. But, there was an 11.3 percentage point drop observed during the year. This is a considerably steeper drop than observed with other issues.
A going concern opinion citing recurring losses as a contributing factor to the going concern indicates profitability issues.
Surprisingly, issues in going concerns related to no or limited operations fell to 21% in FY 2020. This is unusual due to the rise of special purpose acquisition companies (SPACs) during the year. SPACs are blank check companies that have no operations. However, just 29% of SPACs received a going concern in FY 2020, compared to 70% during FY 2019.
To access the full report, click here. Audit Analytics subscribers can download the report from their dashboard.
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