Against a backdrop of falling oil prices and uncertainty over the UK referendum on EU membership, the accounting regulator, the Financial Reporting Council (FRC) has issued a reminder to company reporters about how to deal with elevated risk disclosures in their annual reports and accounts
In a letter sent to audit committee chairs, Stephen Haddrill, FRC chief executive, has set a number of tips for reporters embarking on the 2016 corporate reporting season against a backdrop of increased volatility.
He stresses that the strategic report should form an important element of the overall reporting, providing an opportunity to assess the latest overview of prospects.
When it comes to providing details on the principal risks, the regulator says that disclosures may need to be expanded to cover a wider range of potential outcomes.
The guidance points out that accounts should be drawn up on the basis of the conditions existing at the balance sheet date and suggests that the range of outcomes considered to be reasonably possible may need to be revisited.
The letter highlights the regulator’s concerns about the quality of disclosure and impacts on going concern issues.
For example, it reminds companies that financial reporting standards require companies to disclose material post balance sheet events, including an estimate of the impact or a statement that such an estimate cannot be made.
Due to rising risk levels, it also calls on companies to consider whether such events could have an impact on the preparation of the accounts on a going concern basis or whether there are material uncertainties requiring disclosure.
The FRC letter on reporting guidance around risk is here
