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The UK’s withdrawal from the European Union

Under the European Union (Withdrawal) Act 2018, the UK ceased to be a member of the EU on 31 January 2020 ('exit day'). Under the withdrawal agreement, enacted in UK law by the European Union (Withdrawal Agreement) Act 2020 (WAA 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 published separate guidance for accountants and auditors on the basis of preparation of annual reports prepared under IFRS Standards where the year-end or accounts approval period straddles 31 December 2020. This is particularly relevant for companies subject to Chapter 4 of the FCA’s Disclosure Guidance and Transparency Rules. 

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.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.