FRC issues an update responding to country and currency risk in financial reporting

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17 Jan 2012

The UK Financial Reporting Council (FRC) has issued An Update to Directors of Listed Companies: Responding to increased country and currency risk in financial reports.

The Update was issued due the current economic uncertainties in numerous countries. The Update aims to provide issues to UK listed companies that may occur when responding to the increasing country and currency risk when filing their annual and semi-annual financial reports. The Update notes the following:

The issues Directors could consider include, where relevant:

  • The company's exposure to country risk, direct or to the extent practical indirect, through financial instruments but also in terms of exposure to trading counterparties (customers and suppliers);
  • The impact of austerity measures being adopted in a number of countries on the company's forecasts, impairment testing, going concern considerations, etc.;
  • Possible consequences of currency events that are not factored into forecasts but may impact reported exposures and sensitivity testing of impairment or going concern considerations; and
  • A post balance sheet date event requiring enhanced disclosures to avoid misleading investors. [Footnote omitted]

The Update also suggests that additional guidance should be considered, such as the ESMA's statement Sovereign Debt in IFRS Financial Statements (see our earlier story).

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