In light of the government guidelines, all our offices are now closed and our teams are all working remotely, but are on hand to help you through these challenging times.
The impact of the Covid-19 outbreak is so pervasive that few businesses will emerge unscathed. As directors, you have a duty to consider the ability of the company to operate as a going concern for a period of at least 12 months from the date of sign off of the financial statements. In reaching this conclusion, you must now consider and disclose the impact of the Coronavirus on the company’s ability to remain in operational existence. This will give rise to the following financial reporting considerations:
We expect to see a significant increase in the number of audit reports that draw attention to a Material Uncertainty in relation to Going Concern owing to the increased level of general economic uncertainty. From your auditor you can expect to see increased challenge in relation to future cash flow forecasts in order to ensure that they appropriately take into account the potential impact of Covid-19 on future cashflows. You will need to prepare your forecasts to reflect the impact that Covid-19 may have on your business and these forecasts should include adequate provision for sensitivities in the underlying data.
There may also be logistical considerations in terms of how we perform our audit work. In the event of a full lock-down and/or in order to protect the well-being of our respective teams, we may need to perform the majority/all our audit work remotely. We may also all need to be accepting of the fact that timetables may change because of illness or absence within our respective teams.
The ICAEW and Financial Reporting Council have issued guidance that suggests that, for companies with a 31 December 2019 year end, directors should disclose the pandemic as a non-adjusting post balance sheet event i.e. a disclosable item that should have no impact on the reported figures (expect for possible increases in doubtful debt or other provisions). For companies with a 31 March 2020 year end, the situation is somewhat more complex and directors may need to consider the impact of the pandemic on the fair value and recoverability of all or most balance sheet items.
For non-small entities, all of whom are required to include a strategic report within their financial statements, reference to the pandemic within the ‘principal risks and uncertainties’ section of the report will be commonplace.
As it stands, all companies must still send their accounts, reports and confirmation statements to Companies House in accordance with their existing filing deadlines. If a company’s accounts are filed late, the law imposes an automatic penalty.
Your company should take appropriate measures to ensure accounts are filed on time. If, immediately before the filing deadline, it becomes apparent that accounts will not be filed on time due to your company being affected by Coronavirus (COVID-19), you may make an application to extend the period allowed for filing, by applying online at https://beta.companieshouse.gov.uk/extensions.
If you do not apply for an extension and your accounts have been filed late, an automatic penalty will be imposed.
If you are concerned about filing your accounts on time, please contact a member of our audit team, headed up by Matt Osbourne. Call us on 0808 144 5575 or email COVID19help@armstrongwatson.co.uk.Email us
If you like this article and would like to subscribe to INSPIRED, our FREE monthly newsletter, then please click SUBSCRIBE.Subscribe