U.K. audit regulator eyes coronavirus disclosures
The United Kingdom’s financial regulator, the Financial Reporting Council, issued guidance Tuesday for companies about the disclosure of risks and other reporting consequences stemming from the spread of the coronavirus, and said it is also discussing with audit firms whether the virus will affect their ability to review audits in China and the consequences in terms of delivering timely audit opinions.
By law in the U.K., companies are required to disclose any of the main risks to their business, and the FRC is advising companies to carefully consider what disclosures they may need to include in their annual financial statement, especially for companies that either operate in or have close trading associations with China. That could include, for example, companies with extensive operations or manufacturing in China, and the consequences of any staffing shortages and production delays.
Depending on how much the coronavirus, also known as COVID-19, spreads outside China, other companies could also be affected. Even companies that don’t have a presence in China but have significant trading links or global supply chains that depend on Chinese-manufactured goods will need to consider their disclosures if their businesses face possible disruption. Apple has already lowered its quarterly revenue guidance because many of the components of its iPhones are made in China and many of the phones are sold there.
The FRC also said it’s in discussions with U.K. audit firms to assess the impact on their audits of U.K.-listed companies with Chinese subsidiaries.
“Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic emerges,” an unidentified FRC spokesperson said in a statement Tuesday. “Companies will need to monitor developments and ensure they are providing up-to-date and meaningful disclosures to their shareholders when preparing their year-end reports.”
A link to the guidance can be found here.