United Kingdom | Publication | February 2020
On February 18, 2020, the Financial Reporting Council (FRC) published guidance for companies on the disclosure of risks and other reporting consequences arising from the emergence and spread of the coronavirus. This is particularly relevant for companies which operate in, are dependent on supply chains in, or have close trading associations with, China, although other companies could become affected.
The FRC encourages companies to think carefully about the disclosures they might need to include in their year-end accounts relating to these events, including in their reporting of principal risks and uncertainties and mitigating actions taken. The FRC points out that the carrying value of assets and liabilities might also be affected and additional impairment tests may need to be performed and an assessment of whether leases have become onerous. The FRC notes that for those reporting as at December 31, 2019, these events would be likely to be non-adjusting post balance sheet events as, at that date, few cases had been confirmed and the virus only just identified. For companies with later reporting dates, year-end balances might be affected.
Companies are advised to monitor developments and ensure they are providing up to date and meaningful disclosure when preparing year-end reports.
(FRC, Advice to companies and auditors on Coronavirus risk disclosures, 18.02.20)
(FRC, Advice to companies and auditors on Coronavirus risk disclosures, 18.02.20)
ICSA has published updated model terms of reference for the audit committee of a company seeking to comply fully with the requirements of the 2018 UK Corporate Governance Code. The model terms also reflect the Financial Reporting Council’s Guidance on Audit Committees published in April 2016. These are intended as a guide for companies to adapt to their needs and the list of duties included is based on existing good practice from a number of sources.
(ICSA, Guidance note on terms of reference for the audit committee, 01.20)
ICSA has published updated model terms of reference for the nomination committee of a company seeking to comply fully with the requirements of the 2018 UK Corporate Governance Code. These are intended as a guide for companies to adapt to their needs and the list of duties included is based on existing good practice from a number of sources.
(ICSA, Guidance note on terms of reference for the nomination committee, 01.20)
ICSA has published updated model terms of reference for the remuneration committee of a company seeking to comply fully with the requirements of the 2018 UK Corporate Governance Code. These are intended as a guide for companies to adapt to their needs and the list of duties included is based on existing good practice from a number of sources
(ICSA, Guidance note on terms of reference for the remuneration committee, 01.20)
On February 12, 2020, the Financial Conduct Authority (FCA) published a webpage to let issuers know that the existing process of filing regulated information with the National Storage Mechanism (NSM) is changing. Morningstar currently provides the NSM portal but the FCA will be launching a new NSM portal in due course to replace the Morningstar portal and it will no longer be possible to upload regulated information via email. Instead, issuers and their representatives will require an Electronic Submission System (ESS) account to upload regulated information.
The webpage sets out the process for uploaders to obtain an ESS account, which will involve registration and authorisation. Issuers likely to need to upload a document in April, May or June 2020 are encouraged to register for an ESS account. The webpage notes that further changes will be made in due course, including incorporating functionality to accept structured annual accounts as part of the FCA’s implementation of requirements for the European single electronic format.
On February 13, 2020, the Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) published a joint letter setting out information on accounting and reporting standards during the transitional period (TP) until December 31, 2020. It confirms that during the TP, there is no change to the UK’s accounting and corporate reporting framework.
The letter then considers the position during the TP and after the end of the TP for the following:
The letter also includes a number of frequently asked questions.
(BEIS and FRC, Accounting and reporting during the transition period (TP), 13.02.20)
On February 13, 2020, the Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) published a joint letter setting out information for auditors and audit firms in light of the transitional period (TP) until December 31, 2020. It confirms that during the TP, there is no change for UK and EEA auditors and firms, and their clients.
The letter then considers the position during the TP and after the end of the TP for the following:
The letter also includes a number of frequently asked questions.
(BEIS and FRC, Information on the transition period for auditors and firms, 13.02.20)
On February 18, 2020, the European Securities and Markets Authority (ESMA) updated its Questions and Answers on the Prospectus Regulation with two new Q&As. These provide clarification on the following issues in relation to the Prospectus Regulation:
(ESMA, ESMA updates its Q&As relating to the Prospectus Regulation, 18.02.20)
On February 13, 2020, the Financial Reporting Council (FRC) published implementation guidance relating to the revised Ethical Standard it published on December 17, 2019. This covers transitional provisions and “Other Entities of Public Interest” (OEPIs).
In relation to the transitional provisions, the FRC states that the Ethical Standard has an effective date of March 15, 2020, with transitional provisions for engagements relating to the audit of earlier financial periods, and for non-audit or audit-related services, for which an engagement letter has been agreed and for which work is already underway prior to the effective date, to be completed in accordance with the terms of the original engagement letter. So far as the status of non-audit or audit-related services which have not been engaged for or started prior to March 15, 2020, but which relate to a financial period which commences prior to that date, the FRC states that its view is that an objective, reasonable and informed third-party would be likely to conclude that it would be inappropriate to enter into an engagement for the provision of a service that was not included in the list of permitted services.
The definition of an OEPI is set out in the Glossary of Terms. It excludes fund management entities contained within a private equity or venture capital limited partnership structure. The FRC states that the auditor of a portfolio company held by a private equity or venture capital fund that meets the definition of an OEPI, may only provide non-audit or audit-related services to that entity which are included on the list of permitted services in the Ethical Standard. The same requirement applies to any controlled undertakings held by that entity and to its UK parent. Given the exclusion of fund management entities contained within a private equity or venture capital limited partnership structure from the definition of OEPI, the requirement in respect of providing services to the UK parent applies to services in respect of, or relevant to the OEPI itself, or its subject matter. Other services provided to the UK parent by the OEPI auditor can only be provided after the audit firm has undertaken an assessment of threats to independence and applied any necessary safeguards to address this.
(FRC: Implementation Guidance for Ethical Standard (2019), 13.02.20)
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On 24 October 2024, the Court of Justice of the European Union (CJEU) confirmed that the European Commission’s (the EC) 2009 decision, which imposed a (then record) €1.06 billion fine on Intel, was flawed as far as it found that loyalty rebates granted by Intel had anti-competitive effects.
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