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Closing Out 2019

  • Accounting Roundup - Closing Out 2018 Image

10 Dec 2019

Welcome to our one-stop guide covering the issues relevant to the preparation of December 2019 annual reports.

The FRC's annual review of corporate reporting and ESMA’s common enforcement priorities provide areas of regulatory scrutiny which reporters of all sizes should focus on within in the coming reporting season.

Whether this is correctly classifying cash flows in the cash flow statement, disclosing the nature and amount and impact on liquidity of complex supplier arrangements or proper disclosure of the judgements and estimates applied in preparing financial statements; there are many things to consider.

2019 sees the introduction of a number of new requirements for the front half of the annual report, perhaps the most significant of which is the requirement for all large companies to present an identifiable statement in the strategic report which describes how the directors have discharged their duty under section 172 of the Companies Act 2006. It is expected that most companies will include discussion of their capital allocation and dividend policy within this statement.

In addition, a new Corporate Governance Code takes effect for companies with a premium listing. Very large private companies and unlisted public companies will need to start disclosing their corporate governance arrangements within their directors' report for the first time. Meanwhile, companies required to prepare a directors’ remuneration report will need to include information about the ratio of their chief executive officer’s total remuneration compared to the remuneration of their employees.

Regulators are increasingly taking the position that environmental, social and governance (ESG) matters, including climate change, should be considered as core business issues. Companies are expected to avoid boilerplate disclosures and provide specific disclosure of the impact on a company’s operations on the environment and how environmental matters may affect a company’s development, performance and position.  

Further FRC challenge can be expected over presentation and reconciliation of APMs and business reviews, which should be a balanced and comprehensive analysis of both performance and position.

Turning to the financial statements, UK GAAP reporters will need to consider the changes as a result of the first triennial review of FRS 102. For IFRS reporters, the biggest change for most will be the adoption of IFRS 16 Leases. The FRC expects companies to apply this new standard properly and provide sufficient disclosure of the impact including key judgements made and clear communication of the transition methods adopted. It has published a thematic review to help companies with disclosures in this area.

Our Closing Out 2019 publication covers all these topics and more, providing an invaluable guide to the issues affecting today’s corporate reporting.

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