Many businesses will be completing the posting of their last transactions and journals and beginning to prepare for their audit for their 31 December year end. For entities which adopt FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, there are very limited changes to the recognition and measurement of transactions and balances. The accounting for COVID-19 rent concessions from June 2021 was extended to June 2022. Most businesses with rent concessions covering this period have already adopted this amendment. Changes to hedge accounting requirements as LIBOR (London Inter Bank Overnight Rate) has been discontinued will not affect many businesses as hedge accounting isn’t widely used.
What about international financial reporting?
For businesses which adopt International Financial Reporting Standards, the amendments to hedge accounting rules within IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments will allow their current hedge accounting to continue, even though LIBOR has been replaced by SONIA. IFRS 16 Leases includes the same change to the lease concession period for COVID concessions as UK GAAP, extended from 30 June 2021 to 30 June 2022, and is expected to have minimal impact. This amendment would either have been utilised early or already treated as a lease modification.
Have you considered Brexit?
References within the directors’ responsibility statement and the basis of accounting from International Financial Reporting Standards as endorsed by the EU will have to be updated to reflect Brexit and replaced by UK adopted International Accounting Standards. An equivalent change will also need to be included in your audit report and letter of representation.
Has your business changed size?
Businesses should review their narrative reports (strategic report, directors’ report and energy and carbon report) carefully. For businesses which have changed size, due to changes in turnover, gross asset values and employee numbers, there may be more or fewer reporting requirements. Our article Narrative disclosure requirements can be used as a starting point for your revised requirements.
Your business might be the same size – but is your reporting affected by other factors?
For businesses which are the same size, please review last year’s reports carefully. What changes are needed to your fair review of the business? Has the increase in the inflation rate, or continued challenges with shipping and supplies altered the levels of stock you hold? What implications has this had on your financial key performance indicators? Has your business a greater focus on climate and other environmental factors and how does this affect your section 172 reporting on environmental factors and fostering of relationships with suppliers, customers and your employees’ interests? For large businesses, what changes have been made to the energy efficiency actions disclosed within your Energy and Carbon Report?
If you have any questions, please contact us.