FRC issues guidance on the possible effects of the coronavirus.
The Financial Reporting Council (FRC) has warned companies and auditors that legally required business disclosures of risk are subject to change rapidly as the effects of the coronavirus outbreak mutate.
Companies have been advised to scrutinise their year-end accounts, especially those which either have close trade links with China or have a presence in the area.
The FRC highlighted that the extent of the risk and the likelihood of realisation is also contingent on the specific business circumstances of companies, and that where steps can be taken to mitigate the risk posed by the virus, the said risk should also be qualified.
The conclusion is that the ‘subsequent spread of the virus and its identification as a new coronavirus does not provide additional evidence about the situation that existed at 31 December 2019, and it is therefore a non-adjusting event'.
It then highlights that businesses would still need to consider expected credit losses under:
IFRS 9, ‘Financial instruments’
the impairment of tangible and intangible assets under IAS 36, ‘Impairment of non-financial assets’
the net realisable value of inventory under IAS 2, ‘Inventories’
deferred tax assets in accordance with IAS 12, ‘Income taxes’
any asset or liability measured at fair value and also the entity's ability to continue as a going concern.