Covid-19 - Joint FCA, FRC and PRA guidance published

This morning the Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) published a joint statement on Covid-19 highlighting the importance of corporate reporting and auditing and giving guidance on how directors, auditors, investors and lenders should approach the challenges.

The statement quotes: “Capital markets rely on timely, accurate information.  Investors and other stakeholders rely on financial reporting – backed by high-quality auditing.  However, companies and their auditors currently face unprecedented challenges in preparing and auditing financial information.”

In addition to the joint statement the regulators have also issued additional guidance which includes:

1. A statement by the FCA allowing main market listed companies an extra 2 months to publish their audited annual financial reports.  This gives main market listed companies 6 months to publish audited annual financial reports, and both the FCA and the FRC strongly encourage companies to consider the full use of this timetable.  (The FCA’s statement does NOT apply to AIM listed companies but messages encouraging the use of the full regulatory timetable are just as relevant).  
2. Guidance from the FRC for companies preparing financial statements in the current uncertain environment.  In particular, the FRC notes that directors will need to perform additional work to support going concern judgements and that more material uncertainties are expected to be disclosed.
3. Guidance from the PRA regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS9.  The PRA also encourages lenders to consider the need to treat covenant breaches which arise from the Covid-19 crisis differently from other covenant breaches.  
4. Guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence. The FRC notes that more modifications of audit opinions will be expected during this disrupted period.