New regulatory updates from the FRC, FCA, PRA and LSE

26th March 2020

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The FCA, FRC and PRA have published a joint statement for companies and auditors which can be found on the FCA’s website and on the FRC’s website. The announcement sets out a series of actions that includes:

  1. A statement by the FCA allowing listed companies an extra 2 months to publish their audited annual financial reports.

The FCA has announced temporary relief for main market listed companies who are encountering difficulties in relation to corporate reporting due to the ongoing coronavirus crisis. The relief will permit companies which need additional time to complete their audited financial statements an additional 2 months to publish their statements. Currently, under the Transparency Directive, companies are required to publish their audited financial statements 4 months from their financial year end. From today (26 March 2020), the FCA will not suspend the listing of a company if they publish their financial statements within 6 months of their financial year-end.

The relief is only applicable to companies that are subject to the Disclosure and Transparency Rules (DTR 4.1), and as such, does not apply to AIM companies. The FCA have published a Q&A where you will be able to find additional information on the delay to annual company accounts.

Companies are reminded that the Market Abuse Regulation (MAR) remains in force and that they are still required to fulfil their obligations in relation to inside information. Companies are urged to carefully assess what information constitutes inside information during the crisis as it may alter the nature of information that is material to a company’s prospects.

Regarding the moratorium on preliminary financial statements, the FCA has confirmed that the moratorium can end on 5 April 2020.

  1. Guidance from the FRC for companies preparing financial statements.

The FRC has issued guidance for companies on corporate governance and reporting in response to the coronavirus pandemic. The guidance highlights the need to establish new working practices if usual forms of management and control are disrupted, as well as reminding boards of the consideration they need to give to capital maintenance. The guidance also addresses the difficulties companies face in making forward-looking judgements, such as in strategic reports and viability statements, with a focus on material uncertainties and going concern issues. The guidance includes:

  • The need for narrative reporting to provide forward-looking information that provides insight into the board’s assessment of business viability;
  • Going concern and any associated material uncertainties, the basis of significant judgements and the matters to consider when confirming the preparation of the financial statements;
  • The increased importance of providing information on significant judgements, sources of estimation and other assumptions made; and
  • Judgement required in determining the appropriate reporting response to events after the reporting date.
  1. Guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.

The FRC has issued a Bulletin that includes guidance for auditors, as well as matters to consider where engagements are affected by the coronavirus pandemic. Provided are a list of factors that auditors should give consideration to when carrying out audit engagements during the ongoing crisis, coupled with guidance on how auditors might address these issues. This includes, amongst other things: new audit engagements; planned audit approach; materiality; compliance with laws and regulations; going concern; group audits; and quality control.

The Bulletin, and the guidance contained within, is intended to help auditors in the current situation and will be removed when circumstances return to normal.

In addition to the above, the London Stock Exchange have issued an update to the Inside AIM article they published the other day. Noting that Companies House has allowed companies to apply for a three-month extension of the legal filing deadline, AIM companies will also be able to apply to AIM Regulation for a three-month extension of the reporting deadline.

Andy Crossley
Chair, Primary Markets Expert Group, QCA

Jon Gerty
Chair, Secondary Markets Expert Group, QCA

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