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Article:

Implications for accounting and audit in the event of a ‘no-deal Brexit’

07 November 2018

The Department for Business, Energy and Industrial Strategy (BEIS) has issued a technical notice on the implications for accounting, corporate reporting and audit in the event of a ‘no-deal Brexit’.

While making clear that a ‘no-deal’ scenario remains unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome, BEIS is recommending that businesses take steps to ensure they understand what they would need to do if such a scenario materialises.

Accounting and corporate reporting

The guidance highlights that:

  • Certain exemptions in the Companies Act 2006 relating to the preparation of individual accounts would no longer be extended to companies with parents or subsidiaries incorporated in the EU
  • UK businesses with a branch operating in the EU would become third country businesses and, therefore, would be required to comply with specific accounting and reporting requirements for such businesses in the Member State in which they operate
  • UK companies listed on an EU market may be required to provide additional assurances to the relevant listing authority that their accounts comply with International Financial Reporting Standards.

Audit

The guidance sets out areas that may be affected including:

  • Recognition of EU audit qualifications held by individuals practicing within the UK
  • Recognition of UK audit qualifications held by individuals who want to provide audit services in a Member State
  • Use of an EU audit firm in relation to the audit of an EU business with debt or equity traded on a UK market
  • Registration of UK audit firms wanting to be the auditor of a UK Business with debt or equity traded on an EU market as a third country auditor in the relevant Member State(s).

While the guidance is written in the context of the UK leaving the EU with a ‘no-deal’, BEIS also explains that the same implications may apply to other countries within the European Economic Area (EEA) (ie Norway, Iceland and Liechtenstein).

Businesses that expect to be affected by any of these implications, and expect to file annual reports by the end of March 2019, may wish to put arrangements in place to ensure any filing is complete by 29 March.

In addition to the technical notice on accounting and audit implications, BEIS has issued a further technical note on cross border business operations and European specific entities.

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