The review found that although companies provided sufficient information to enable a user to understand the impact Covid-19 had on their performance, position and future prospects, some – particularly interim reports – would have benefited from more “extensive disclosure”.
Building on the guidance contained in the joint regulators statement, the FRC said this review of a sample of March interim and annual reports and accounts includes guidance and better practice examples for companies currently preparing their annual and interim accounts.
The FRC said companies should:
- Explain the significant judgements and estimates made in preparing their accounts and provide meaningful sensitivity analysis or details of a range of possible outcomes to support any disclosed estimation uncertainty.
- Describe any significant judgements made in determining whether there is a material uncertainty about their ability to continue as a going concern.
- Ensure that assumptions used in determining whether the company is a going concern are compatible with assumptions used in other areas of the financial statements.
The FRC’s executive director of supervision, David Rule, said: “The impact of the Covid-19 pandemic on businesses is pervasive but also differs across sectors, geographies and individual companies.
“This review highlights how important it is for company reporting to explain not only how Covid-19 has affected company performance but also how it might affect a company’s future prospects.”
He added: “Drawing on examples, we provide further guidance and good practice recommendations to support both companies and users of company reporting during this challenging period.”