This analysis was originally posted by Audit Analytics.
Public companies headquartered in Western European countries collectively reached their highest rate of going concern opinions (GCOs) during fiscal year (FY) 2019, before falling during FY2020. Western Europe is made up of eight countries: Austria, Belgium, France, Germany, Liechtenstein, Luxembourg, the Netherlands, and Switzerland. Each country saw its own unique trends for GCOs. However, most saw high rates of GCOs during FY2019.
The rate of GCOs in Western Europe had been on the rise since FY2011. Just 2.1% of companies received a GCO during FY2011. That percentage gradually increased, reaching 4.7% during FY2018. Just one year later, GCOs jumped to 5.7%. The one percentage point year-over-year increase was the largest seen over the ten-year period reviewed.
Subsequently, FY2020 had the largest drop in GCO rates seen year-over-year in the last ten years. A decrease of 1.2 percentage points.
These trends are most impacted by a few countries. France, Germany, and Switzerland make up nearly 80% of listed companies in Western Europe.
France and Germany both reached their peak rate of GCOs in 2019; 4.6% and 7.7% respectively. Each saw the greatest decline over the ten-year period during 2020. Germany’s GCO rate dropped 1.1 percentage points in 2020. France dropped 2.2 percentage points from 2019. GCOs continued to rise in Switzerland during 2020.
Small-cap companies be followed a similar trend as Germany and France. These companies reached their peak rate of GCOs in 2019 at 10.6% before falling to 8.3% in 2020. Small-cap companies have a significantly higher overall rate of going concerns opinions than large and mid-cap, and have seen a steep upwards trend in GCOs since 2015. Interestingly, large-cap companies in Western Europe have not had a single going concern opinion over the ten-year period.
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