Newswire December 2025

Welcome to our December Newswire.

The festive season is upon us and all of us at Mercia are wishing all our friends, clients and colleagues a wonderful Christmas and all the best for 2026.

This year has been another eventful one. At Mercia, the highlights of our year included winning the ESG/Sustainability Initiative of the Year Award at the International Accounting Awards 2025, in recognition of our groundbreaking Sustainability Assurance Manual (International).

Last year, our Mercia experts made some predictions for 2025. In our latest podcast, Helen Knight and Jenny Faulkner take a look back at these and see how accurate they were in forecasting changes to technology, ESG and mega marshmallows!

We’re sure 2026 will be another busy year. For those who can’t wait to see what next year may hold please check out Mercia’s predictions blog.

In our final newswire of 2025, we look at HMRC’s guidance on what to do to disincorporate a company and the tax authority has also published an update on Class 2 NIC errors, please see the tax section for details. On the audit side, the Financial Reporting Council has released its latest Audit Market and Competition Update and the regulator has also published a new suite of taxonomies.

Thank you for all your support in 2025 and we look forward to working with you again in 2026. Wishing you a Happy Christmas and a healthy and prosperous New Year.’

AUDIT & ACCOUNTANCY

FRC report highlights changing make up of PIE audit market

The Financial Reporting Council’s (FRC’s) latest Audit Market and Competition Update shows non-Big Four firms now hold 40% of PIE audit engagements, up from 22% at the start of the decade. The report credits initiatives such as the Future of Audit Supervision Strategy and the Scalebox Programme for supporting smaller firms and improving market resilience. Efforts to enhance competition aim to reduce concentration risk and expand audit access for UK SMEs, which represent 99% of the private sector.

FRC publishes new suite of taxonomies

The FRC has published its 2026 Taxonomy Suite, which includes specialist taxonomies for Charities and Irish entities. The taxonomies have been updated to factor in UKEB endorsed amendments to IFRS 7, updates to concepts under FRED 85, additional enhancements to disaggregation options and general enhancements to clarity and references to the latest SORPs. Further information can be found here.

New FRC guidance aims to assist corporate reporting by smaller companies

The FRC has released a thematic review offering practical guidance to help smaller listed companies enhance corporate reporting. Based on analysis of 20 annual reports outside the FTSE 350, it highlights four key areas: revenue recognition, cash flow statements, impairment of non-financial assets, and financial instruments. The review includes illustrative examples contrasting good and poor disclosures, aiming to improve transparency and compliance. Auditors, investors, and audit committees are encouraged to use these insights to drive better reporting quality.

UKEB Seeks Feedback on Draft Assessment of IFRS 19 Adoption

The UK Endorsement Board (UKEB) is consulting on its draft Endorsement Criteria Assessment of IFRS 19 Subsidiaries without Public Accountability: Disclosures. IFRS 19, effective from 1 January 2027, offers reduced disclosure requirements for eligible subsidiaries. The UKEB invites stakeholder views on whether the standard meets UK needs and is suitable for adoption. Feedback can be submitted via the Invitation to Comment form by 26 February 2026. Further details and educational resources are available on the UKEB’s IFRS 19 project webpage.

UKEB Releases Research on Net Debt Disclosures

The UKEB has published its fifth research paper on the IASB’s project on cash flow statements, focusing on global net debt disclosures. The paper explores their importance to users and suggests ways to improve comparability and accessibility of this key metric.

UKEB Publishes Annual Reports Highlighting IFRS Adoption and Governance Achievements

The UKEB has published its Annual Reports for 1 April 2024 to 31 March 2025. The first details how the UKEB discharged its delegated functions, including adopting amendments to international accounting standards and influencing IFRS development. The second outlines governance and due process compliance. Chair Paul Lee emphasized the UKEB’s role in supporting investment confidence and economic growth through robust standards and stakeholder engagement, underpinned by strong governance and strategic objectives.

IASB unveils proposed accounting model designed to better reflect how financial institutions manage interest rate risk

The International Accounting Standards Board (IASB) has proposed a Risk Mitigation Accounting model to better reflect how financial institutions manage interest rate risk. The approach responds to concerns that current hedge accounting rules fail to capture dynamic risk management strategies. The model aims to improve transparency around financial performance and future cash flows, offering investors clearer insight into risk management practices. Stakeholders are invited to comment until 31 July 2026. Whilst this is an international market and therefore will not directly impact professionals working under UK standards, it is likely that, dependent on the success and reception of the model, the FRC will consider recommending adoption within the UK.

AUDIT & ACCOUNTANCY: PENSIONS

Government moves to resolve uncertainty in the wake of Virgin Media case ruling

The government has published draft legislation to resolve uncertainty following the Virgin Media v NTL Pension Trustees ruling. The Court of Appeal confirmed that historic amendments to contracted-out defined benefit schemes were void unless the scheme actuary provided written confirmation at the time of change. The new rules, included in the upcoming Pension Schemes Bill, aim to provide clarity for trustees and ensure compliance with statutory standards going forward.

CORPORATE REPORTING

FRC highlights how companies’ Wates Principles reporting reflects the framework’s adaptability and continued focus on strong governance

The FRC has released its first reporting insights of the Wates Corporate Governance Principles for Large Private Companies since assuming oversight earlier this year. The report highlights strong disclosures on risk management and stakeholder engagement but notes room for improvement in areas such as board composition and remuneration. Examples of good practice demonstrate the flexibility of the framework and its role in strengthening governance among large private companies.

SUSTAINABILITY

New illustrative reports provided by IAASB to support implementation of ISSA 5000

The International Auditing and Assurance Standards Board (IAASB) has released a collection of illustrative practitioner’s assurance reports to assist with the roll out of ISSA 5000 by firms and other stakeholders. The aim of the release is to provide best practice examples of practitioner reporting across a wide variety of possible scenarios, including both unmodified and a full range of modified (qualified, disclaimed or adverse) conclusions. UK based readers should note that these are yet to be adopted for use by the UK market, though they will be considered and adapted as necessary by the FRC. Further information can be accessed here.

ICAEW

ICAEW issues new technical release on legal privilege

Auditors often need access to privileged information to assess legal and regulatory risks, but entities may hesitate to share it. A recent High Court ruling clarified auditors’ responsibilities when privilege is claimed. In response, the Institute of Chartered Accountants of England and Wales (ICAEW) has issued a new technical release providing practical guidance on handling legal privilege, directors’ duties, audit evidence requirements, reporting implications, and relevant case law. It also explains types of legal privilege, how privilege may be lost, and what auditors should record in their files.

TAX

Transfer a business out of a company

HMRC have published guidance on what to do to disincorporate a company. To read more, please click here.

Update on Class 2 NIC errors

HMRC have published an update on Class 2 NIC errors. To read more, please click here.

MTD awareness letters

Throughout November 2025, taxpayers who had submitted their 2024/25 return by August 2025 may have been sent a letter from HMRC about MTD. To read more, please click here.