With the recent referendum outcome for the UK to leave the EU, this has created uncertainty in both the political and economic environment. On 12th July the FRC issued a press release highlighting matters for directors to consider when preparing their half-yearly or annual financial statements.
The areas of disclosure to be found in either the strategic report or the interim management report, which could be most affected by the recent vote include:
The description of the business model should include details of the main markets in which your company operates, as well as its value chain, to allow users’ to assess the company’s exposure.
Principal risks and uncertainties
- The referendum could impact on the nature and extent of the risks and uncertainties facing your company. This may include factors affecting all companies, or those specific to your industry or company circumstances, such as the impact on exports to the EU.
- Your risk assessment should also consider if there are any increases in the risks to solvency, liquidity or other risks that may have implications for the viability statement in the annual report.
The areas of disclosure to be found elsewhere in the financial statements which could be most affected by the recent vote include:
Fair value disclosures
Volatility in the markets, for example foreign exchange fluctuations, may affect the fair value of items in the statement of financial position or after the year end. This will impact on your fair value disclosures, in particular, disclosures relating to sensitivity and future cash flows.
Assets may need to be reassessed for impairment which would impact the disclosures in relation to these areas and may even require additional disclosure for newly impaired assets.
As with any major change to the risks you face, you will need to consider the going concern assumption and whether additional disclosure is required, particularly in relation to material uncertainties.
Pentana Disclose includes the detailed disclosure requirements for the above areas and it is worth reviewing your answers to your current checklist in light of this announcement. This can be done using the report function to review all your answers. Or if you want to find a particular area of disclosure, you can use the search function in the Checker software and search for key words within a question, such as ‘business model’.
The full FRC press release can be found here.