Going Concern KPMG Assessment and Management Actions

KPMG's going concern assessment is a critical process that involves evaluating a company's ability to continue operating as a going concern. This assessment is typically performed as part of an audit or review engagement.

A company is considered a going concern if it has the ability to meet its obligations as they become due. KPMG assesses this ability by considering factors such as the company's financial position, cash flow, and operating performance.

KPMG may identify material uncertainties related to a company's ability to continue as a going concern, which can include issues such as liquidity problems, debt covenant breaches, or significant customer losses. These uncertainties can impact a company's ability to meet its financial obligations.

Management actions to address going concern issues may include obtaining additional financing, renegotiating debt agreements, or implementing cost-cutting measures to improve cash flow.

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External events like natural disasters or pandemics can cause significant economic uncertainty, making it harder for companies to continue as a going concern.

Companies in various sectors and jurisdictions are affected differently, but all need to consider the potential implications for their going concern assessment.

External events can cast significant doubt on a company's ability to continue as a going concern, especially if they're severe or collective.

Transparency is key, and companies preparing year-end financial statements under IFRS Standards need to provide relevant disclosures around going concern.

Robust assessment and entity-specific disclosures are required when external events create economic uncertainty and impact a company's ability to continue as a going concern.

KS Energy's independent auditor, KPMG LLP, has expressed doubts over the company's ability to continue as a going concern. This is a significant issue, as it means the company may not be able to meet its financial obligations.

The company incurred a net loss of S$53.9 million for FY2018, and as of end-2018, its current liabilities exceeded current assets by S$18.3 million. This is a major red flag.

KS Energy also has capital commitments of S$489 million at end-2018, with no financing arrangements in place to meet these obligations. This adds to the uncertainty surrounding the company's financial situation.

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KS Energy's independent auditor, KPMG LLP, has expressed doubts about the company's ability to continue as a going concern. This is due to the group's net loss of S$53.9 million for FY2018.

The group's current liabilities exceeded current assets by S$18.3 million, and they also had deficits in shareholders' equity of S$10.3 million (excluding non-controlling interests).

KS Energy has S$31 million of bonds subject to redemption through a proposed issuance of new shares. The company also has capital commitments of S$489 million at end-2018, with no financing arrangements in place to meet the obligations.

Management has acknowledged that there are uncertainties over the group's ability to generate the necessary cash flows to meet its debt obligations.

KS Energy has given various assurances of its ability to meet its obligations, but there are ongoing negotiations with prospective customers regarding several rig charter contracts.

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Management plays a crucial role in assessing a company's ability to continue as a going concern. This involves updating forecasts and sensitivities, taking into account risk factors and different possible outcomes.

At least one severe but plausible downside scenario should be considered to ensure a comprehensive assessment. This will help management identify potential risks and develop strategies to mitigate them.

Reviewing projected covenant compliance in different scenarios is also essential. This will help management understand how the company's financial obligations will be met in various circumstances.

Management should assess its plans to mitigate events or conditions that may cast significant doubt on the company's ability to continue as a going concern. This includes reassessing the availability of financing and determining whether plans are achievable and realistic.

Clear and robust disclosures are necessary, including information about uncertainties identified in the going concern assessment where relevant. This will help stakeholders understand the company's financial situation and potential risks.

Consideration of relevant regulatory guidance is also important. This will help management ensure compliance with relevant laws and regulations.

Here are the key actions for management:

Economic uncertainty has been prevalent in global markets over the last several years, making it harder for companies to meet their obligations. This has led to a reevaluation of the going concern presumption.

The going concern presumption is foundational to financial reporting, but it can be challenged during uncertain economic times. Companies may see their financial performance, liquidity, and cash flow projections negatively impacted.

Uncertainty can disrupt business as usual, making forecasting less reliable and the past no longer predictive of the future. This makes the going concern assessment much harder to document and update.

Management's responsibility for a going concern assessment has become more critical. The ever-evolving complexities attributable to economic uncertainty require robust disclosures.

Here are the key components of a going concern report: