Document ID: chunk:federal_register_of_legislation:F2023C00340:reg:10:p9
Version: federal_register_of_legislation:F2023C00340
Segment Type: reg
Provision Reference: reg 10 (pt 9/29)
Character Range: 29652–32908

public sector entities.  For example, Australian Accounting Standard AASB 101 addresses the issue of the ability of public sector entities to continue as going concerns.[9]  Going concern risks may arise, but are not limited to, situations where public sector entities operate on a for‑profit basis, where government support may be reduced or withdrawn, or in the case of privatisation.  Events or conditions that may cast significant doubt on an entity's ability to continue as a going concern in the public sector may include situations where the public sector entity lacks funding for its continued existence or when policy decisions are made that affect the services provided by the public sector entity.

Risk Assessment Procedures and Related Activities

Events or Conditions That May Cast Significant Doubt on the Entity's Ability to Continue as a Going Concern (Ref: Para. 10)

    A3.             The following are examples of events or conditions that, individually or collectively, may cast significant doubt on the entity's ability to continue as a going concern.  This listing is not all‑inclusive nor does the existence of one or more of the items always signify that a material uncertainty exists.

    Financial

           * Net liability or net current liability position.

           * Fixed‑term borrowings approaching maturity without realistic prospects of renewal or repayment; or excessive reliance on short‑term borrowings to finance long‑term assets.

           * Indications of withdrawal of financial support by creditors.

           * Negative operating cash flows indicated by historical or prospective financial report.

           * Adverse key financial ratios.

           * Substantial operating losses or significant deterioration in the value of assets used to generate cash flows.

           * Arrears or discontinuance of dividends.

           * Inability to pay creditors on due dates.

           * Inability to comply with the terms of loan agreements.

           * Change from credit to cash‑on‑delivery transactions with suppliers.

           * Inability to obtain financing for essential new product development or other essential investments.

    Operating

           * Management intentions to liquidate the entity or to cease operations.

           * Loss of key management without replacement.

           * Loss of a major market, key customer(s), franchise, licence, or principal supplier(s).

           * Labour difficulties.

           * Shortages of important supplies.

           * Emergence of a highly successful competitor.

    Other

           * Non‑compliance with capital or other statutory or regulatory requirements, such as solvency or liquidity requirements for financial institutions.

           * Pending legal or regulatory proceedings against the entity that may, if successful, result in claims that the entity is unlikely to be able to satisfy.

           * Changes in law or regulation or government policy expected to adversely affect the entity.

           * Uninsured or underinsured catastrophes when they occur.

    The significance of such events or conditions often can be mitigated by other factors.  For example, the effect of an entity being unable to make