FRC Lab report on corporate reporting and Covid-19

The FRC's Financial Reporting Lab has published two reports on corporate reporting issues in light of the ongoing Covid-19 pandemic. One covers Resources, action, the future and the other Going concern, risk, and viability.

Both reports summarise the key messages from the FRC Lab's previous reports discussing these issues which were published in June 2020 (see our blog post at the time). They provide an update on recent developments in these areas, provide practical examples of reporting since June 2020 and provide guidance on what disclosures may look like going forward.

In relation to going concern, risk and viability, the key issues in that report include:

• Going concern and viability – Companies are generally providing more information in the annual report to support the going concern assessment. Looking ahead, the report says that discussion of the process used in relation to scenario planning and mitigations would be helpful.
• Risk reporting – 'Covid-19' or 'pandemic' has been included by almost all companies as a new primary or emerging risk. Going forward, the FRC Lab says that disclosing the effects of Covid-19 on other risks, rather than including the pandemic as a standalone risk, may provide more useful information to investors.

In relation to resources, action and the future, the key issues in that report include:

• Resources – Companies continue to provide information about their cash balances and liquidity. The FRC Lab says that cash may once again become an issue for companies and so providing detail of the evolving cash position is increasingly important.
• Actions – Companies continue to disclose the actions that they are taking in response to the pandemic. Going forward, describing the actions taken by management at different stages in the recovery process is very useful.
• The future – The higher level of uncertainty resulting from the pandemic continues to be discussed by companies. Looking forward, further information on future prospects, opportunities and more granular information by geographical location would be helpful for investors.