In response to today’s statement from the Financial Reporting Council (FRC) about the impact of Brexit on companies’ annual financial statements, Danielle Stewart OBE, Head of Financial Reporting at RSM said:
’In explaining how Brexit affects companies’ annual financial reporting, the general disclosures being suggested by the FRC - including details of the business model, the principal risks and uncertainties arising from Brexit and the impact of changes in forex rates - are of course helpful.
‘However, we are encouraging our clients to think as specifically as possible - how does Brexit affect their own activities in particular? For example, as the FRC mentions, certain assets may be impaired or contracts previously considered to be long term might be cancelled, impacting going concern. However, the FRC doesn’t mention contingent liabilities that may arise from Brexit, depending on the deal that is done with the EU, the potential impact on profitability of non-recoverable VAT for companies which currently incur and recover a lot of input tax in other EU states, the effect of no longer receiving a grant or subsidy from the EU nor even the somewhat unlikely impact on operations of a mass exodus of European employees.
‘Directors need to think entity specific, think outside the box, and disclose as much as they can, because one thing is for sure - Brexit will impact on all companies. What the user of a set of accounts needs to know is, how does it impact on your company?’