IAASA has published an Information Note ‘Consideration of the impact of Brexit for issuers’ half-yearly financial reports’ which sets out factors that IAASA suggests should be considered by issuers when preparing half-yearly financial reports for the six months ended 30 June 2016.
On 23 June 2016, the United Kingdom voted to leave the European Union. This vote has resulted in uncertainty in the economic and political spheres. The timing and outcome of negotiations between the UK and the European institutions as to the manner of the UK’s exit is not clear.
Many Irish issuers have very significant trading links with the UK economy and/or very significant transactions and balances denominated in Sterling.
The impact of Brexit is likely to have a significant impact on the risks and uncertainties facing Irish issuers and, consequently, on the nature and extent of disclosures required to be provided in their financial reports.
Most Irish issuers’ half-yearly financial reporting period is for the six months to 30 June 2016. Given that most issuers will shortly commence or have just commenced the preparation of these financial reports, IAASA feels it is timely to issue this Information Note. The purpose of this Note is to assist issuers’ management and those charged with issuers’ governance in the preparation of high quality half-yearly financial reports by offering observations on:
- the more significant financial reporting and legal requirements considered relevant to this topic when preparing the half-yearly financial report; and
- the range of factors that IAASA expects issuers to consider when presenting their interim management statement.
It is IAASA’s expectation that directors and Audit Committees will consider a range of factors when preparing the interim management report including, but not limited to, the following:
- risks and uncertainties for the remaining six months: issuers are required to disclose the risks and uncertainties for the remaining six months of the financial year. Given the market volatility that has already resulted from the Brexit decision, the principal risks and uncertainties for issuers have changed since those that were disclosed in their most recent annual reports.
Issuers should describe the new principal risks and uncertainties arising such as their exposure to currency risk, volatility in demand for products and services, and changes in supply chain costs.
- important events during the first six months: issuers are required to disclose an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements which would include the impact of the Brexit decision for the issuer.
These disclosures should be entity specific and issuers should avoid the use of boilerplate disclosures in this regard.
It is intended that the matters set out in this Information Note will be an area focus of IAASA’s examinations of 2016 half-yearly financial reports.
The Information Note may be accessed here