In Thursday’s Financial Reporting Council (FRC) annual letter to CEOs, CFOs, and audit committee chairs, the regulator’s CEO Sir Jon Thompson set out “key matters” relevant to the 2020–2021 financial reporting season.
These include reporting and COVID-19, the UK’s exit from the EU, climate change, and application of IFRS 15, Revenue From Contracts With Customers, and IFRS 16, Leases. The letter also looks at future IFRS developments.
On reporting in the COVID-19 environment, Thompson said investors expect company reports to explain clearly:
- Currently available cash and other resources;
- Key actions that management has taken and is planning to take;
- The longer-term impacts of COVID-19 on the business model and strategy; and
- The board’s assessment of going concern and viability, as well as the methods, judgements, and assumptions underlying the assessments.
He also pointed to the cash flow and liquidity thematic review that the FRC is to publish, which will provide guidance on the disclosure of liquidity risk, going concern, and viability.
On Brexit, Thompson said in the letter that the regulator expects reports to “explain company-specific risks and uncertainties, including the potential impacts on different parts of the business and any effects on the financial statements (including major sources of estimation uncertainty, amounts at risk, and ranges of potential outcomes)”.
In a press statement, he said: “The economic uncertainty caused by the COVID-19 pandemic has only heightened the need for companies to provide clear disclosures that allow users of accounts to properly understand a company’s position, financial performance, and outlook.”
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.