The IAASA has stressed the importance for entities to take account of the increased risk and uncertainty due to Brexit in their financial statements, through the use of subjective judgments and the use of estimates.

Financial reporting impacts of Brexit may include volatility in the quoted prices for financial assets, provisioning implications, additions to risk disclosures, and whether there are changed implications for the recovery of deferred tax assets.

Due to new accounting standards currently in the process of being implemented, including IFRS 9 Financial Instrument, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases, the recognition, measurement of assets, liabilities, income, expenses and cashflows may be affected.

Audit Committees should also provide more entity-specific disclosures that inform of the measurement bases used in the fair value measurement of intangible assets, in response to IFRS 13 Fair Value Measurement standard.

Some financial instruments can show characteristics of both equity and liabilities therefore the entity-specific terms on which they are issued can alter the accounting treatment to be applied. Therefore, financial reports should clearly disclose the accounting policy which has been adopted.

Care should be taken in reporting financial performance, including the use of alternative performance measures (APMs or KPIs) and the quality of disclosures. Disclosures should be relevant and tailored to the reporting company’s circumstances.

The IAASA’s document is aimed at those involved in the preparation, approval and/or review of the entities financial reports, including management, Audit Committees and Boards, providers of audit and legal advisors.

The IAASA’s Observations on Selected Financial Reporting Issues is available here.