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Brexit resources

Changes to the UK’s accounting, corporate reporting, auditing and corporate governance regimes 

Under the European Union (Withdrawal) Act 2018, the UK ceased to be a member of the EU on 31 January 2020. Under the withdrawal agreement, enacted in UK law by the European Union (Withdrawal Agreement) Act 2020, there is an implementation period (IP), which ends on 'IP completion day', defined as 31 December 2020 at 11.00 p.m. UK time.

UK reporting continues to be subject to the EU legislative framework until IP completion day. This means that:

  • existing company law relating to accounts and audit continues to apply;
  • companies that are required or choose to adopt IFRS Standards must use IFRS Standards 'as endorsed for use in the European Union', meaning that new or revised Standards cannot be adopted before EU-endorsement; and
  • the FRC remains a competent authority of an EU Member State, tasked with monitoring and supervising compliance with ESMA’s common enforcement priorities, which therefore remain relevant for UK company reporting.

There are a number of changes to the UK’s accounting, corporate reporting, auditing and corporate governance regimes after the end of the transition period.  These changes are reflected in a number of statutory instruments which have been made by the government.  These instruments amend retained EU law and EU-derived domestic legislation to address deficiencies and ensure that the law continues to operate effectively after IP completion day. They take effect from IP completion day, although in many cases transitional provisions exist such that changes take effect only for financial years beginning on or after IP completion day.  The majority of changes made by these statutory instruments are to the Companies Act 2006 and affect a variety of provisions including eligibility for the small companies regime, exemptions from preparing consolidated accounts and the availability of audit exemption for subsidiaries. They also introduce a new legal term ‘UK-adopted international accounting standards’ for IFRS Standards as adopted by the UK and provide for a UK endorsement mechanism of IFRS Standards. 

The Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) have jointly published updated letters to audit firms and companies setting out changes to the UK’s corporate reporting framework after the end of the transition period.

The FRC has issued updates to FRSs 100-105 to reflect changes in the law as a result of the UK’s withdrawal from the EU

Investor and FRC expectations in annual reports

The significant uncertainties in relation to the UK’s future relationship with the EU and the terms of any future economic partnership agreement continue to persist. Investors look for transparent information on how the uncertainties arising from the ongoing UK-EU negotiation affect the company, including its ability to continue as a going concern and its longer-term viability and prospects.

In its letter to Audit Committee Chairs and Finance Directors, the FRC's expectations are clear.  It expects company reports to explain company-specific risks and uncertainties arising as a result of Brexit. This should include the impacts on different parts of the business and any effects on the financial statements including major sources of estimation uncertainty, amounts at risk and ranges of potential outcomes.

This page includes all of our resources on the financial reporting implications of Brexit.  It includes links to:

Related resources

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Closing Out 2019 discusses the significant corporate reporting issues relevant to 31 December 2019 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2018/2019 and the ESMA’s common enforcement priorities for issuers in the European Union, together with other developments in reporting standards and areas of investor interest.

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The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/685) have been approved by the government.

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This Need to know discusses the accounting, auditing and corporate governance – legal and regulatory changes arising from a “No Deal” Brexit.

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The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 (SI 2019/177) have been approved by the government.

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15 Feb 2019

The Accounts and Reports (Amendment) (EU Exit) Regulations 2019 (SI 2019/145) have been approved by the government.

Governance in brief — Brexit and viability disclosures - a timely reminder

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This Governance in brief examines the responsibilities of directors regarding risk and viability reporting, the importance of directors understanding the potential impact of Brexit through internal scenario planning, and how the board can ensure that shareholders and other stakeholders receive unambiguous disclosure through the annual report.

Accounting Roundup - Closing Out 2018

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Closing out 2018 discusses the significant corporate reporting issues relevant to 31 December 2018 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2017/2018, the ESMA’s common enforcement priorities for issuers in the European Union together with developments in reporting standards and areas of investor interest.

Governance in brief — FRC issues advice on annual reports for the 2018/19 reporting season

06 Dec 2018

The Financial Reporting Council (FRC) has issued its Annual Review of Corporate Reporting and annual letter to finance directors and audit committee chairs covering its perspective on key developments for 2018/19 annual reports.

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25 Oct 2018

The Financial Reporting Council (FRC) has published a letter to Audit Committee Chairs and Finance Directors, in advance of the 2018/19 reporting season, highlighting changes to reporting requirements and key matters which should be considered in the preparation of forthcoming annual reports and accounts.

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24 Oct 2018

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The government has published a “no deal technical notice” on accounting and audit, setting out changes to the UK’s corporate reporting and audit frameworks if there is no deal between the UK and the EU over the terms of the UK’s exit from the European Union on 29 March 2019. It does not provide details of the frameworks if a deal is reached, which would apply after the end of an implementation period on 31 December 2020 – during that period existing laws and regulations would apply.

IASB chair provides update on current activities

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At the IFRS conference in Frankfurt, IASB Chair Hans Hoogervorst provided an update on the use of IFRS Standards around the world and the current thinking of the IASB.

Robert Bruce interviews — Paul George, Executive Director, Corporate Governance and Reporting at the Financial Reporting Council

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In a wide-ranging video interview Paul George talks to Robert Bruce about the responses to the recent Corporate Governance Code consultation and areas of challenge in governance generally, what the FRC would like to see more of from strategic reports and information on directors’ responsibilities, what it would like to happen with IFRS post-Brexit, and how the Stewardship Code needs to evolve.

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