Mercia Newswire February 2021

  • Mercia Group
  • 26 February 2021 12:08

With Boris Johnson having presented his roadmap out of Covid-19 restrictions we are getting ready for the Budget on 3 March. Rishi Sunak is expected to make announcements on coronavirus support measures to help businesses and individuals.

Moving into the 2020/21 reporting season, companies and their auditors are seeing the challenges on how to report informatively on an exceptional year when so much is still in flux. The FRC’s consolidated guidance will be welcome; some other consultations may not receive much attention in “busy season” although some, such as the FRC’s proposals for meeting its expected increased costs, could have a widespread effect.

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COVID guidance

The FRC has consolidated all its Covid-19 guidance for companies and auditors, meaning users now only need to look to a single place. It has also added new guidance on factors that may increase the risk of material misstatement due to fraud or other irregularities; notes on the consequences of improper financial support claims; and updates to the subsequent events section reflecting the fact the pandemic is no longer new.

A new Know-How guide has been issued by the ICAEW’s Audit and Assurance Faculty to provide guidance for auditors on the potential for fraudulent activity to take place in connection with the range of government support packages being provided in response to the pandemic. It includes details of the risk assessment may be affected, issues that the engagement team should consider as part of their pre-audit discussion and how audit procedures may be revised to take accounts of additional fraud issues.    

Joint regulators statement for companies and auditors

The FRC and FCA have issued a piece of joint guidance for companies and auditors reminding them of their reporting responsibilities and the continuing extra challenges arising from the pandemic. Listed companies are reminded that they still have two months longer than usual to publish their annual reports; all companies are pointed to the FRC’s consolidated covid-19 guidance, and auditors are asked to remember their regulatory obligations to report to the regulator on a timely basis when matters arise.  

FRC draft plan and budget

The FRC has issued its draft 2021/2 plan and budget. It sets out the process for the FRC transitioning to the ARGA in 2023 and the expected increased costs of this work and of the new UK Endorsement Board, which will be funded by increased levies on the CCAB and preparers. It also proposes a set of KPIs for measuring its own performance. The draft is open for comment until 12 March.

IASB consultations – rate regulated activities and extending covid-19 rent concession amendments

The IASB is consulting on extending the period for which the amendments to IFRS 16 relating to covid-related rent concession would apply, so that it went on to June 2022 rather than June 2021. This recognises the continuing effects of the pandemic. It would be expected that the UK's FRC might consider a similar extension to the rent concession in FRS102 if this amendment is passed.

The IASB has also issued a new Exposure Draft on rate-regulated activities, including proposals that companies in this sector would include regulatory assets and liabilities on their balance sheets to improve information to investors. The new standard would replace IFRS 14.


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