Going concern assessment made in financial reports by management boards of listed real estate companies in Poland during the COVID-19 pandemic

Abstract

Purpose: The objective of this article is to determine how many real estate entities have tackled going concern problems, to identify the going concern uncertainties disclosures, especially during the COVID-19 pandemic, and to assess the going concern disclosures that have been made.Methodology/approach: The study involved the financial reports of real estate companies listed on the main market of the Warsaw Stock Exchange. 35 (out of 40) reports for the first half of 2020 were examined. The content of full versions of the descriptive parts of financial statements, reports on the auditor’s review, and management comment letters were analyzed.Findings: The way the disclosures are made can be a challenge. The management’s analysis of the entity’s situation involving significant judgments is of key importance. Reports on the auditor’s review may facilitate interpretation, especially because the way narrative, the variety of detail, and the location of the disclosures make inference difficult. The pandemic affected the scope of disclosures without increasing the number of entities disclosing uncertainties.Research limitations/implications: The research was limited to published, complete, half-yearly reports of listed companies of one sector, subject to review by the auditor. The issue of going concern disclosures is worth developing in future research of annual reports of various sectors, especially in the context of successive economic crises, including the war in Ukraine.Originality/value: As a practical study of disclosures, the article is the first empirical assessment of how going concern disclosures are made, revealing the role of significant judgments.

Keywords

• going concern
• financial reports
• uncertainties
• disclosure
• COVID-19 pandemic
• real estate