FCA, PRA and FRC statements on corporate reporting and COVID-19

A series of actions and statements have been published by the FCA, PRA and FRC this morning in relation to corporate reporting and COVID-19.

The FCA has published a statement which, in effect, gives listed companies an additional two months to finalise their annual report and accounts. Under DTR 4.1.3, companies have four months from their financial year end in which to publish audited financial statements, but the FCA says that it will not suspend the listing of companies if they publish financial statements within six months of their year-end. The statement also reiterates that the Market Abuse Regulation remains in force and listed companies are still required to fulfil their obligations concerning inside information as soon as possible.

The Q&A to accompany FCA statement confirms that the FCA statement does not currently extend to half yearly financial reports (interims) which should still be published within three months of the half year end in accordance with DTR 4.2. However, the FCA strongly recommends that listed companies review all elements of their timetables for publication of financial information in order to make appropriate use of the time available within regulatory deadlines to ensure accurate and carefully prepared disclosures.

The FCA, PRA and FRC have also published a joint statement on corporate reporting this morning which discusses a range of issues, including:

• Systems and controls - Companies should develop and implement mitigating actions and processes to ensure that they continue to operate an effective control environment and should consider how they will secure reliable and relevant information, on a continuing basis, in order to manage their future operations.
• Capital maintenance - Companies should pay attention to capital maintenance, ensuring that sufficient reserves are available when the dividend is made, not just proposed. The assessment of whether a dividend is appropriate should include consideration of current and likely operational and capital needs, contingency planning and the directors’ legal duties, both in statute and common law.
• Audit opinions - That modified audit opinions may be required where auditors have been unable to gather the necessary audit evidence to complete the audit in full.
• Going concern - Given the uncertainty about the immediate outlook for many companies, disclosures may be required that management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern.
• Auditors - Key audit partners may stay on past the five years rotation period and companies are encouraged to consider delaying planned tenders for new auditors, even when mandatory rotation is due.

In addition, the FRC has published guidance for companies preparing financial statements and a bulletin for auditors covering factors to be taken into account when carrying out audits during the current COVID-19 crisis.   This is accompanied by a summary of five key questions investors are seeking information from companies on.