FRC advice to companies and auditors on coronavirus risk disclosures
18 February 2020
The Financial Reporting Council (FRC) has today published guidance for companies
on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus (COVID-19). The regulator is also discussing with audit firms whether the virus affects their ability to review component audits in China and the consequences to delivering timely audit opinions.
By law, companies are required to disclose principal risks to their business. The FRC is advising companies to carefully consider what disclosures they might need to include in their year-end accounts, which will be particularly relevant for companies either operating in or having close trading associations with China. The extent of the risk and the degree to which it might crystallise depends on companies’ specific business circumstances. These could include, for example, extensive operations or manufacturing in China, with consequential staff shortages and production delays.
Depending on the extent to which the virus spreads outside of China, other companies could also become affected. Additionally, companies which might not have a presence in China but have significant trading links or global supply chains dependent on Chinese-manufactured goods will need to consider their disclosures if their businesses face possible disruption.
The FRC is also in discussions with audit firms to assess the impact on their audits of UK listed groups with Chinese subsidiaries.
A spokesperson for the FRC said:
“Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic emerges.
“Companies will need to monitor developments and ensure they are providing up-to-date and meaningful disclosures to their shareholders when preparing their year-end reports.”
A link to the guidance can be viewed here