LONDON (Reuters) – Britain’s listed firms should spell out how Brexit might hit their business and never pad out annual studies with generic issues, the Financial Reporting Council (FRC) stated on Wednesday.
The Union Flag flutters within the wind in entrance of Blackpool Tower, in Blackpool, Britain, October 22, 2018. REUTERS/Hannah McKay
After the failure of building agency Carillion earlier this yr, the FRC is below political stress to crack the whip on poor reporting. Its powers to convey auditors to heel are being reviewed after lawmakers stated its response to Carillion was “timid”.
The accounting regulator reviewed 220 company studies for 2017/2018 and found firms taking totally different approaches to reporting on dangers arising from Britain’s deliberate departure from the European Union subsequent March.
Paul George, government director of company governance and reporting on the FRC, stated Britain faces challenges with company reporting after Brexit.
“Companies should therefore do more to meet the expectations of the market and society in order for the UK to maintain its position as an attractive home for global capital,” George stated.
Britain and the EU have stated they need a divorce settlement and transition deal in place by March, however firms are being urged to have contingency plans in case of a no-deal Brexit.
Companies ought to distinguish of their subsequent annual report between particular and direct challenges to business fashions from Brexit, and broader financial uncertainties, the FRC stated.
Threats like adjustments to import and export taxes, or delays to produce chains, ought to be “clearly identified and for management to describe any actions they are taking, or have taken, to manage the potential impact,” the FRC stated in an open letter to finance administrators and chairs of audit committees.
“In some circumstances this may mean recognising or remeasuring certain items in the balance sheet.”
Even after the annual report has been signed off by auditors round December, corporations ought to nonetheless disclose any extra info in annual studies when printed, the FRC stated.
“It will be for companies to decide whether Brexit uncertainties impact their statements on viability and even their ability to continue as a going concern,” it added.
It additionally stated it’ll begin taking a look at whether or not annual studies on the whole are nonetheless helpful given the elevated quantity of knowledge on firms obtainable from analysts and different sources.
Reporting by Huw Jones; Editing by David Holmes