U.K. – FRC Brexit Report Preparations

U.K. – FRC Brexit Report Preparations

On 16 September 2019, UK FRC issued letter to firms re EU exit preparations.

  • Letter submitted to firms regarding EU exit preparations, contains action points, links.

Overview

  • Highlighted that it is vital for businesses across UK to be aware of/prepared for Brexit.
  • As risks may arise, firms need to communicate those to stakeholders and investors.
  • Letter supports UK GVT’s wide-ranging efforts to raise profile of extensive material developed to help companies be as prepared for EU exit as possible.

Planning

  • Many may be well prepared, undertaken significant contingency planning initiatives but may not be the case for all businesses, nor for all suppliers, customers, employees.
  • Even well prepared businesses are advised to keep plans under close review.
  • Suggestions re most critical generic actions companies should consider in advance of Brexit, however emphasized it is by no means an exhaustive list of needed actions.

Employees - EU Settlement Scheme

  • EU citizens resident in UK before 31 October 2019 can stay and continue working in UK.
  • Resident EU citizens have until 31 December 2020 to apply to EU settlement scheme if hard Brexit, until then, they can work, rights to access services/claim benefits unchanged.

Additional Legal, Regulatory, Administrative Barriers

  • If hard Brexit, EEA rules for cross-border trade in services will no longer apply for UK.
  • UK businesses will no longer be treated as local businesses, services provided by UK businesses and professionals will be regarded as originating from 3rd country.
  • UK firms, service providers may face additional legal, regulatory etc barriers as result.
  • Encouraged firms to engage with local chambers of commerce or business advisor, attend Brexit Business Readiness event, encourage suppliers/customers to do likewise.

Corporate Reporting in Preparation for Exit

  • In October 2018 wrote to Finance Directors and Audit Committee Chairs to remind what they should consider when reporting on risks associated with EU exit.
  • Encouraged companies to provide disclosure which distinguishes between specific, direct challenges to business model / operations from broader economic uncertainties.
  • Challenges to be clearly identified, management describe actions to manage impact.
  • This may mean recognizing or remeasuring certain items in balance sheet.
  • Broad uncertainties may still attach to exit when companies report that will require disclosure of sufficient information to help users understand degree of sensitivity of assets, liabilities to changes in management’s assumptions.
  • Expect many companies will want to consider wider range of reasonably possible outcomes when performing sensitivity analysis on cash flow projections (to be disclosed, explained), but reminds not all companies will require extensive disclosure.
  • For companies to decide if Brexit impacts statements on viability, ability to continue.
  • Letter provides array of resources, links to related information it advises firms to read.