Regulator and government ramp up Brexit advice

With six weeks until the Halloween deadline for Brexit, the Financial Reporting Council (FRC) has written to audit committee chairs and finance directors setting out actions companies should consider in advance of the UK’s exit from the EU

The letter from FRC chief Stephen Haddrill states that ‘even businesses which have invested much time in preparing to leave the EU are well advised to keep their plans under close review’, and sets out five generic points for consideration.

Top of the list is asking employees to check if they need to apply to the EU settlement scheme in order to ensure they can continue to live and work in the UK in the event of a no deal Brexit.

Secondly, the FRC advises businesses to check whether they will face additional legal, regulatory and/or administrative barriers as a result of the UK becoming a ‘third country’ in the event of a no deal EU exit.

Third country status

Without a deal, the UK will not be able to operate under the EEA [European Economic Area] regulations for the cross-border trade in services. UK businesses will no longer be treated as if they were local businesses; services provided by UK businesses and professionals will be regarded as originating from a ‘third country’.

Larger firms should ensure that all aspects of their supply chain will operate as expected in the event of no deal, including taking SMEs through no deal planning, taking on board their reactions to such a scenario, and providing support and help where possible.

Financial reporting

In terms of financial reporting requirements around Brexit, Haddrill said: ‘The broad uncertainties that may still attach to exiting the EU when companies report will require disclosure of sufficient information to help users understand the degree of sensitivity of assets and liabilities to changes in management’s assumptions.

‘We expect that many companies will want to consider a wider range of reasonably possible outcomes when performing sensitivity analysis on their cash flow projections and which should be disclosed and explained.

‘Not all companies will require extensive disclosure, but where sensitivity or scenario testing indicates significant issues, relevant information and explanation should be reflected in the appropriate parts of the annual report and accounts, for example in the impairment disclosures. It will be for companies to decide whether exiting the EU uncertainties impact their statements on viability and even their ability to continue as a going concern.’

Brexit briefing events

There is also advice to check local chambers of commerce information, as well as the government’s recently launched Brexit business readiness events. These are over 30 events taking place around the UK spanning the next five weeks. They will provide advice on areas including the importing and exporting of goods, exporting services, employing EU citizens and businesses that transfer data, and extra support available in the local area.

The free events will combine a keynote address from senior government officials, advice stands and in-depth sessions, with the first sessions starting in Northampton, Nottingham and Swindon this week.

FRC letter to firms about EU exit preparations

Pat Sweet

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