Continuing uncertainty about the UK’s departure from the EU could impact estimates, judgements, disclosures as well as management decisions on changes in the organizational structure of companies. As a result, the Brexit can have accounting and reporting implications.
The United Kingdom (UK) is scheduled to leave the European Union (EU) on 29 March 2019. At present, there is still uncertainty about the terms on which the UK will leave the EU, and whether transition arrangements or other factors may affect the timing and magnitude of any impacts of departure. Various scenarios, including a no-deal exit or an extended period of negotiations, remain possible at this stage. This level of uncertainty associated with the UK’s departure (Brexit) can be significant for companies and could have an immediate impact on the financial statements over the financial year 2018.
During periods of heightened uncertainty and market volatility, users will look for information in the financial statements as well as broader corporate reporting to better understand the effects these conditions may be having on the entity’s historical financial performance and to understand the actions taken by management to respond to potential risks. Recent research of, among others, KPMG has indicated that only a minority of the Dutch companies are well prepared for Brexit.
From a preparer’s perspective, robust and meaningful disclosures in annual reports about the entity’s exposure to the risks associated with Brexit and their impact on the financial statements are key. Users and regulators are expected to pay particular attention to disclosures about Brexit in 2018 reports. Some regulators, including ESMA and the US SEC, have highlighted Brexit disclosures as a specific area of focus.
With the 2018 financial statements due the upcoming months, this publication will provide you with some accounting and reporting considerations.
A company should consider whether economic uncertainties and market volatility will affect accounting and reporting conclusions related to forward looking estimates and judgements. Considerations include:
The above highlights just a few examples that may have an impact on your accounting, disclosure and/or financial reporting. The list is not exhaustive. You may find some further useful information on KPMG’s Brexit website.
How are you preparing for Brexit during continued market uncertainty? KPMG the Netherlands has set up a Brexit Taskforce and our experts can help you uncover all the possibilities, so you can prepare for what happens next and where possible, even turn risks into opportunities.
From an accounting and reporting perspective, KPMG can help you to assess how the anticipated Brexit will impact your accounting and reporting process. KPMG can support with performing modeling and sensitivity analysis as well advice you on adequate disclosures to your stakeholders on the (potential) impact the Brexit has on your organization.
Please contact Niels Ebbinkhuijsen, +31 (0)20 656 86 85 or by email.
1 Brexit-Industry-Barometer, January 2019, KPMG Meijburg & Co, VNO-NCW, FME and NBCC
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