The Financial Reporting Council has published an outline of matters that should be considered by preparers of half-yearly and annual reports in respect of the recent referendum vote for the UK to leave the EU [1]. Clearly, the vote to leave has led to both economic and political volatility, and there is potential for much longer term uncertainty.

The FRC notes that "not all businesses will be affected to the same extent. Boards must determine what disclosures, if any, are required to ensure their financial statements and management and strategic reports meet the needs of investors and comply with regulatory requirements". In particular, the Strategic Report should contain a transparent discussion of risks and uncertainties and companies should consider the nature of disclosure that is required regarding the impact of the referendum decision on both future performance and position of the business, and on amounts reported in the financial statements. Smaller entities which are not required to produce a Strategic Report should consider whether disclosures are necessary in the Director's Report.

The FRC encourages entity-specific disclosures and that care should be taken to avoid 'boilerplate' disclosures. Entity specific disclosures are more useful and informative for investors, for example, the impact of trade agreements for companies with a high level of exports to Europe.

As well as addressing front-end disclosures, the FRC outlines that some elements of the financial statements may be affected by Brexit. For example, market volatility and the impact on exchange rates, interest rates and market prices may have implications for the fair value measurement of financial instruments recognised at 30 June 2016. Similarly, the measurement of provisions and financial liabilities could be affected. Assets could be impaired. Contingent liabilities could arise. Foreign exchange gains and losses and changes in fair value could impact on profitability. Significant disclosures may be needed on the management of related risks as well as changes in the value of assets and liabilities.

Events after the reporting date should also be evaluated. The FRC recommends that boards should consider the disclosure of non-adjusting events occurring after year end. Examples of such events include abnormally large changes in asset prices or foreign exchange rates.

Finally, going concern assessments should take into account the implications of Brexit, noting that "disclosures of material uncertainties are needed particularly where there is a material risk of breach of covenants".

Boards are encouraged to discuss these issues with their auditors as soon as possible, in order to begin planning for the implications of Brexit on the next financial reporting cycle. Many accounting firms have appointed senior partners to lead on Brexit-related issues and to provide support to clients. For example Karen Briggs is appointed as KPMG's "Head of Brexit"; she recently commented that "the firm has been advising clients to consider the next two weeks, two months and two years to assess the path ahead." [2]

Certainly there are much wider issues that need to be addressed by businesses in their strategic and operational response to Brexit than financial reporting matters, but users of the financial statements will need assurance from the financial statements on how management is dealing with Brexit as well as an understanding of its implications for financial performance and position. These matters needs to be comprehensively addressed whilst avoiding the problem of information overload. The FRC attaches great importance to Clear & Concise reporting [3] and any risks and uncertainties that are disclosed should enable the reader to understand how those risks and uncertainties are relevant given the specific facts and circumstances of the company.