Covid-19 – a review of financial reporting

Interim reports need to have more extensive disclosure of how companies have been affected by Covid-19, says the latest thematic review of company reporting by the FRC.

That said the FRC felt that companies were providing sufficient information to enable a user to understand the impact of the pandemic had on their performance, position and future prospects.

Interestingly, FRC said in the current climate it would encourage companies to consider the need for disclosures not explicitly prescribed by IFRS to enable users of accounts to understand the impact of events and conditions on a company’s position and financial performance, as required by paragraph 31 of IAS 1 ‘Presentation of Financial Statements.’

The FRC has reminded companies that they need to:

Explain the significant judgements and estimates made in preparing their accounts and provide meaningful sensitivity analysis or details of a range of possible outcomes to support any disclosed estimation uncertainty.

Describe any significant judgements made in determining whether there is a material uncertainty about their ability to continue as a going concern. 

Ensure that assumptions used in determining whether the company is a going concern are compatible with assumptions used in other areas of the financial statements.

Apply the requirements of IAS 1 to any exceptional or similar items, with income statement sub-totals comprising only items recognised and measured in accordance with IFRS. 

Apply existing accounting policies for exceptional and other similar items to Covid-19 related income and expenditure consistently and should not split income and expenses between Covid-19 and non Covid-19 financial statement captions arbitrarily.

Prepare interim reports that provide sufficient information to explain the impact that Covid-19 has had on their performance, position and future prospects.

Check out the full review at: