Financial reporting and audit considerations of COVID-19

As coronavirus continues to spread and more information comes to light about the nature of the virus and its impact, companies will need to consider how it affects their business and how this should be reported in the financial statements.

Meeting your deadlines

In a normal reporting cycle, companies face a number of external and internal deadlines.

These deadlines are driven by:

• Company legislation (AGM notice periods, statutory filing deadlines);
• Industry-specific regulation (FCA);
• Listing requirements; or
• Financing arrangements (such as debt covenants).

Meeting these timetables can be tricky for some businesses even in normal circumstances.

The impact of COVID-19 will make achieving those deadlines even greater but with increased stakeholder engagement and careful project management, they can still be met.

Our top tip is to make sure you understand all the stakeholders involved and the steps that are necessary to reach completion. Preparing a step-by-step plan will give structure to the weeks and months ahead and ensure a smooth process. It is vital that companies start talking to stakeholders as early as possible and continue to speak with them throughout the process so expectations are managed.

The government’s response to COVID-19 is evolving all the time with additional reliefs being announced almost every day. While this is going on, it is important to remember that projects are dynamic and as more information comes to light, your project plan may need to remain flexible. We will keep our pages updated over the coming weeks with additional information added as it comes to light so remember to keep checking back for more information.

For those businesses that require an audit, there are additional challenges to meeting deadlines.

Companies will need to consider their ability to access information remotely to provide the necessary audit evidence required for an auditor to form an opinion. Furthermore, with so many people unable to work, does it have the bandwidth to produce the technical assessment papers and supporting documentation required?

Financial reporting impact

In getting to the end point with a set of financial statements, there are a number of areas of the financial statements that will need extra consideration in light of COVID-19. Companies should expect additional challenge from their auditor in these areas.

From our perspective we see the following as being the main areas of financial reporting that may be affected:

• Events after the reporting period
• Going concern
• Fair value measurement
• Expected credit loss assessment under IFRS 9
• Impairment of assets
• Principal risks and uncertainties
• Disclosures
• Other accounting estimates

Our Consulting and Accounting Solutions Team (CAST) provide Accounting advisory support and ison hand to help you understand which deadlines affect you, how these have been impacted by COVID-19 and to guide you through the financial reporting requirements.

As the situation is evolving day by day, we will post our analysis and advice as new information comes to light. Please keep checking back over coming weeks or call us directly with any questions.

DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.