FRC issues advice to companies and auditors on coronavirus risk disclosures

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18 Feb, 2020

The Financial Reporting Council (FRC) has today published guidance for companies on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus (COVID-19).

The guidance will be particularly relevant for companies either operating in, dependent on supply chains in, or having close trading relations with China.  In addition, the overall economic uncertainty in the region could indirectly affect entities that do not have direct exposure to COVID-19 in the region.

The FRC encourages companies to consider what disclosures they might need to include in their year-end accounts relating to these events.  Specifically companies should consider whether to refer to the possible impact of COVID-19 on their business in their reporting of principal risks and uncertainties. Where mitigating actions can be taken, these should be reported alongside the description of the risk itself.   

In addition to reporting the effects of COVID-19 in the principal risks and uncertainties section of the annual report, the FRC also highlights that the carrying value of assets and liabilities might also be affected with a need to perform additional impairment tests and to assess whether leases have become onerous.

With respect to post balance sheet events, for reporters with December 2019 year-ends, the FRC indicates that these events would likely be non-adjusting.  However for companies with later reporting dates, the FRC highlights that year-end balances might be affected. 

The FRC highlights that required disclosures will likely change as more information about COVID-19 emerges. As a result companies will need to continually monitor developments and ensure that they are providing up-to-date and meaningful disclosure when preparing year-end reports.   

A press release and the guidance is available on the FRC website. 

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