FRC reporting reviews to focus on high risk sectors

The Financial Reporting Council (FRC) has set out plans to review the impact of the latest lease accounting and revenue recognition IFRS standards as part of its 2020/21 thematic reviews

It will also intensify work on audit quality and monitoring reviews, prioritising activity around certain high risk areas such as financial services, retail, construction and manufacturing.

The FRC’s Corporate Reporting Review team will conduct four corporate reporting thematic reviews. These will identify scope for improvement, as well as areas of better practice, in a number of areas of stakeholder interest.

On the audit front, the FRC’s audit quality reporting (AQR) team will intensify monitoring of the auditors’ work on going concern and the viability statement, long-term contracts, impairment of non-financial assets, fraud risk and the application of new accounting standards on revenue recognition and leases.

For reporting, there will be a strong focus on practical implementation of the latest International Financial Reporting Standards (IFRS).

The standard setter will build on its initial work on the impact of IFRS 16 Leases in interim reports by considering how a sample of companies apply the standard to their annual report and accounts, particularly around disclosure reporting. It will also examine the extent to which the findings of the interim reports’ review have been addressed.

On IFRS 15 Revenue from Contracts with Customers, which made sweeping changes to the accounting rules on revenue recognition reporting from 1 January 2018, the FRC said it would conduct a ‘deeper dive’ into the application of the standard.

It will also look at reporting issues around cashflows and liquidity disclosures, as well as an investigation into the effects of the Brexit decision on disclosure reporting.

The corporate reporting review team will also contribute to a planned FRC-wide project focusing on climate change, by reviewing the relevant disclosures given in companies’ annual reports.

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