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Financial reporting: FRC advice on Coronavirus risk disclosures
Practical Law UK Legal Update w-024-1109 (Approx. 3 pages)
Financial reporting: FRC advice on Coronavirus risk disclosures
by Practical Law Corporate
| Published on 19 Feb 2020 • United Kingdom |
The FRC has published advice to companies and auditors on Coronavirus risk disclosures in year-end reports.
On 18 February 2020, the FRC published advice to companies and auditors on Coronavirus risk disclosures in year-end reports (for background, see Legal update, Financial reporting: FRC Annual Review of Corporate Governance and Reporting 2018/2019). The emergence and spread of Coronavirus is relevant for companies operating in, dependent on supply chains in, or with close trade associations with China. Depending on the extent of the virus's spread outside of China, other companies could be affected. The FRC encourages companies to consider what related disclosures they might need in their year-end accounts, stating:
- The extent of the risk and the degree to which it might crystallise depends on companies' specific business circumstances.
- Companies should consider whether to refer to the virus's possible impact on their business in reporting principal risks and uncertainties. Mitigating actions that can be taken should be reported with the risk description.
- Required disclosures will likely change over time. Companies should monitor developments and provide up-to-date and meaningful disclosure.
Additionally, the carrying value of assets and liabilities might be affected with a need to perform additional impairment tests and to assess whether leases have become onerous. For December year-end reporters these events would be likely to represent non-adjusting post balance sheet events as the end of 2019, given the virus's development. However, for companies with later reporting dates, year-end balances might be affected.