Preparing interim reports as at June 2020 could be quite different to previous years due to the various financial reporting implications arising from the COVID-19 pandemic. For many December year end reporting companies, the 2019 annual reports were published with perhaps only some subsequent events disclosures and front end commentary about the possible effects of the COVID-19 outbreak. So the June 2020 interim reports could be the first time to report in more detail on the financial effects.
We have prepared separate guidance on a number of specific financial reporting topics over the last few months so do take a look at the Business Edge Index 2020 for articles and links to BDO publications. In this article, we set out some reminders of the key considerations and guidance specific to interim reports at 30 June 2020.
BDO illustrative interim financial statements - 30 June 2020
Guidance on interim reporting is available in the Illustrative interim financial statements as at 30 June 2020 recently published by BDO Global. This publication includes explanations and illustrative disclosures for interim reports prepared to a 30 June 2020 interim reporting date in accordance with IAS 4 Interim Financial Reporting, including detailed guidance about applying IAS 34 and disclosures that may be relevant to describing the effects of COVID-19 such as the impairment of assets or applying the recent Amendments to IFRS 16: COVID-19 Related Rent Concessions (these have not yet been endorsed by the EU and should, therefore, only be applied in June 2020 interims if endorsement takes place before the interim report is issued).
Interim report requirements
The purpose of an interim report is to provide an update since the last annual report so companies should explain significant events and transactions that have affected the financial statements. This could result in more disclosure in this year’s interim reports compared to previous ones to explain the numerous and potentially pervasive effects of the COVID-19 pandemic: for example, changes to estimates and any additional impairment reviews and provisions that may have arisen along with other accounting effects.
Of course, not all companies are required to follow IAS 34, but it is nonetheless considered to be a good source of guidance to refer to when deciding what should be included within the annual report.
New and amended IFRS in June 2020 interims
Interim reports should be prepared using accounting policies consistent with those to be applied in the annual report for that year. That means that any new standards or amendments to standards effective for that accounting period are required to be adopted and reflected in the interim report. Read our article Reminders for June 2020 interim reports – Amendments to IFRS for a summary of the amendments to IFRS which became effective from 1 January 2020.
Risk and going concern reporting in interim reports
Two other important areas to focus on in June 2020 interim reports are updates to principal risks and uncertainties disclosures for the specific effects of COVID-19, along with the mitigating actions taken and planned to address those risks, as well as disclosures about the going concern assessment. For entities subject to the FCA’s Disclosure Guidance and Transparency Rules (DTR), principal risks and uncertainties should be updated to reflect the situation for the remaining six months of the financial year.
In its COVID-19 guidance, the FRC has highlighted the importance of disclosures about risks and going concern. In an update on interim reporting in May 2020, the FRC noted that disclosures might include any material uncertainties to going concern, assumptions made about the future path of COVID-19 and the public health responses, the projected impact on business activities, use of government support measures, and access to bank and other financing.
If going concern has become a significant issue since the previous annual financial statements, directors should undertake procedures similar to those that they would have carried out for annual financial statements to ensure that all relevant issues have been identified and considered. For further guidance on these matters, read our article FRC guidance for reporting in times of uncertainty.
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