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Article:

Year-end reminders for 2019 financial reporting – it’s been a busy year!

12 December 2019

2019 has been a year of change for accountants! There are a number of new disclosure regulations and accounting standard changes for both IFRS and UK GAAP reporters which are effective for periods beginning on or after 1 January 2019.

We have produced a number of articles throughout the year which discuss these changes and provide further guidance. As we head into the first reporting season impacted by these new regulations we thought it would be useful to provide a 2019 summary:

Reporting under IFRS

The IFRS Dec 2019 Illustrative financial statements are available from our website and incorporate the following amendments:

  • The main headline is that IFRS 16 Leases is now in effect. Our IFRS 16 page provides guidance and links to publications. There are also recent articles on the Financial Reporting Council’s (FRC) Thematic Review of IFRS 16 transitional disclosures and a summary of lessee presentation and disclosure requirements.
  • IFRIC 23 is also now in effect. This provides guidance on accounting for uncertain tax treatments and is likely to result in changes for some companies.
  • There are a number of other amendments and improvements to existing standards which became effective from 1 January 2019. There were amendments to IAS 19, IAS 28 and IFRS 9 plus some more minor changes resulting from the Annual Improvement 2015-2017 Cycle to IFRS 11, IAS 12 and IAS 23. Read more here.
  • Following the first full year of implementation of IFRS 15 and 9, the FRC have undertaken thematic reviews on the required disclosures in the financial statements. Articles summarising the key messages were published for IFRS 15, IFRS 9 for corporates, and IFRS 9 for banks.
  • The FRC has also completed a thematic review on impairment disclosures for non-financial assets (IAS 36) and a discussion of their findings can be found here.
  • Finally, the FRC has also recently written an open letter to Audit Committee Chairs and Finance Directors about the findings of its Annual Review of Corporate Reporting 2018/19 and the improvements it expects to see in the upcoming reporting season.

UK GAAP

FRS 102 has been amended for the triennial review 2017 and this is effective for accounting periods beginning on or after 1 January 2019. Many of the amendments were editorial in nature but there were a few changes that could affect the financial statements and there have been some revised disclosure requirements. An earlier article on the changes can be found here.

Narrative reporting

There have been some significant changes to narrative reporting which are effective from 1 January 2019. The revised disclosures impact both UK GAAP and IFRS reporters and have different scoping requirements, so it is very important to assess which regulations are applicable for each entity:

  • One of the most significant changes to the Regulations is the introduction of the ‘s172 statement’. All large UK companies (large under the Companies Act definition, not just size thresholds i.e. applies if the company is large only because it’s an ineligible company) will be required to include a s172 statement as part of the strategic report and also publish this on their website. Read our Tips for preparing the new Section 172 Statement.
  • The changes to the Regulations have also introduced 2 new disclosures in the directors’ report:
    • A statement summarising engagement with employees (for all large and medium companies with more than 250 UK employees this year and last year, or for the past two years).
    • A statement detailing how the directors have had regard to the need to foster business relationships with suppliers, customers and others (for all large companies judged purely on the size criteria i.e. using only the Companies Act size criteria, not the ineligibility criteria).
    • These are similar to some of the requirements for the s172 statement.
  • A Statement of Corporate Governance is required for individual companies that have a) more than 2,000 employees and/or b) turnover of more than £200m and a balance sheet total of more than £2bn, this year and last, or for the past two years. This requirement excludes those giving a Corporate Governance statement under the Disclosure Guidance and Transparency Rules (DTR) or Community interest companies (CICs) or charitable companies.
  • There are also new disclosures within the Directors Remuneration Report for Quoted companies. Companies will need to include ratios which compare the CEO pay with that of the company’s employees. There will also be a new requirement to report on the impact of share price growth on share-based executive pay. Read more here.
  • Any Directors remuneration policies approved after 10 June 2019 are also subject to new requirements.
  • There will be changes to corporate governance disclosures for any companies which apply the UK Corporate Governance Code (for instance, this is required for all companies with a Premium listing on the Main Market of the London Stock Exchange). The FRC released its updated (2018) UK Corporate Governance Code in July 2018 and this is applicable for periods beginning on or after 1 January 2019. Read more here

Finally, it also worth noting here that there are new disclosures for emissions and energy consumption for accounting periods beginning on or after 1 April 2019. This will affect large companies and LLPs. Comparatives do not need to be provided in the first year of application. Read more here.

Brexit

The ongoing uncertainty over Brexit makes it difficult for businesses to communicate the possible effects to stakeholders. However, the FRC is keen to ensure that companies provide sufficient disclosures which clearly identify any specific and direct challenges to their operations, and distinguishes these from any broader economic uncertainties which may arise.

As Brexit Day approaches and more detail emerges about a proposed exit deal or, more importantly, what the consequences of a no-deal scenario may be, companies should be providing more detailed disclosures in their annual reports. While the uncertainty continues, this may mean covering different Brexit scenarios in order to provide meaningful information to allow stakeholders to assess the risks.

We have a dedicated Brexit hub which provides guidance when considering the financial reporting implications for Brexit risks and uncertainties.

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