Management assertions about whether a company can continue as a going concern in the current economic environment should be “required reading” for investors, according to a Fitch outlook for 2009.

Companies and their auditors are facing off over whether toxic assets without ready buyers should be written down. Exacerbated by a drawn-out standoff in credit markets, the conditions raise big questions about whether companies can secure financing they need to continue operating, says Fitch. “This is a particularly sensitive issue because profitability and regulatory capital adequacy are at stake for many financial institutions,” Fitch wrote in a special report titled “Accounting and Financial Reporting: 2009 Global Outlook.”

“Most of the accounting issues that are out there seem pretty obvious in 2009,” said Olu Sonola, director at Fitch. Those include determinations and disclosures around fair value, impairments, derivatives, credit swaps, off-balance-sheet activity, business combinations, and pensions, to name a few. “It’s the severity that may turn out to be surprising. Going concern is at the top of our list of what to look out for.”

Sonola said the United Kingdom is talking more openly about the going concern question. “In the U.K. people are jumping on it trying to give some early direction as to where there are going concern issues,” he said. “In the U.S. it seems that’s not really the case. It would not come as a surprise to see a lot more going concern opinions in the U.S. than most people anticipate.”

Dina Maher, senior director at Fitch, and Sonola said they are reserving judgment on whether hasty efforts at the Financial Accounting Standards Board to improve impairment accounting will have the desired effect for 2008 financial reporting. They share concerns debated at FASB that the guidance may only delay writedowns. “There’s a lot of talk out there that (delayed writedowns) may turn out to be the result,” said Sonola. “I’m not sure it will be totally helpful.”

Maher said the firm has developed its own loss expectations for entities on a case-by-case basis rather than waiting for entities to announce they have assets that are impaired and can’t recover their value. “Given the nature of accounting today, we need to look at those companies that have significant unrealized losses and make a determination as to whether some of those losses will become realized, and if so what portion.”