While companies continue to evaluate the impact on operations during the COVID-19 crisis, there is a seemly endless flow of information to digest for boards and CFOs.

EY has distilled our top 10 areas to consider for financial reporting and provided a live reference source for current guidance and regulations. This web page will be regularly updated to keep you up to date on the latest developments.

1. Leading with purpose and values
2. Assessing cash flow and going concern
3. Preparing for a remote close process
4. Keeping connected with the regulatory landscape
5. Assessing financial reporting matters
6. Preparing to address investor questions
7. Understanding and accessing government tax measures and support
8. Identifying and assessing claims and disputes
9. Mitigating risks related to defined benefit pension schemes
10. Looking to the future and the economic outlook

1. Leading with purpose and values

During this humanitarian crisis, empathetic leadership and candid, straightforward communication is more important than ever.

Companies who live their purpose through COVID-19 will generate long-term value that will pay dividends. We hosted a discussion with five top executives on creating long-term value by keeping your company’s purpose at the heart of what you do, in responding to multiple stakeholder needs, and to maintain the foundation for the future.

2. Assessing cash flow and going concern

There is no change to the going concern accounts rule during the pandemic. Management must continue to prepare a going concern assessment and disclose uncertainties if they are aware of events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. The responsibility of the auditor continues to be in assessing the adequacy of the basis for management’s conclusion.

The business must evaluate the trading environment, liquidity, and mitigating factors. We share practical guidance on the requirements, considerations, disclosures that are key to investors around going concern, and what to expect from the auditors.

3. Preparing for a remote close process

The current business environment will introduce significant risk to companies’ month-end close and financial reporting processes. The close process may take longer with a remote workforce, abrupt macroenvironmental changes will create incremental requirements, and the UK regulators are revising regulatory guidelines and requirements. We have practical tips to prepare for your remote close process:

• Take exemptions and extensions offered by regulator
• Set up virtual command centre
• Agree and share protocols of communication
• Risk rank accounts and review after first month end
• Create a new sequence for your close calendar
• Look for opportunities to shorten close activities
• Review resource allocations
• Pursue automation activities
• Assess control gaps
• Align with information systems on system access and tracking

4. Keeping connected with the regulatory landscape

The pandemic has completely altered the economic, regulatory and societal environment in which businesses operate. Regulators have acted swiftly to relieve pressure on businesses, with increased timeframes for annual reporting, and new guidance for issuers and preparers.

5. Assessing financial reporting matters

The COVID-19 pandemic presents huge challenges for preparers of financial statements. There is a vital need for reliable information to regain trust in uncertain times, and part of that will be provided through financial reporting. Several areas may be impacted:

• Going concern
• Financial instruments
• Impairment assessment
• Government grants
• Income taxes
• Liabilities from insurance contracts
• Leases
• Insurance recoveries
• Onerous contract provisions
• Fair value measurement
• Revenue recognition
• Events after the reporting period
• Other financial statement disclosure requirements
• Other accounting estimates 

6. Preparing to address investor questions

Investors are keen to understand key company information in this time of uncertainty. Five key questions investors seek information on relate to liquidity and asset preservation from the FRC Lab:

• How much cash does the company have?
• What cash and liquidity could the company obtain in the short-term?
• What can the company do to manage expenditure in the short-term?
• What other actions can the company take to ensure its viability?
• How is the company protecting its key assets and value drivers?

7. Understanding and accessing government tax measures and support

Government policy and stimulus responses to COVID-19 are rapidly emerging and governments around the world have various support and stimulus responses.

• EY global tax policy tracker is an interactive tool to help you monitor rapidly emerging Government policy and stimulus responses to COVID-19.

The UK Government measures can be summarised into six areas being addressed through the banking system, the central tax system and the benefit system:

• Providing liquidity through financing schemes
• Helping employers to protect jobs
• Business support through removal of fixed costs and provision of grant
• Cash-flow support, including tax deferrals
• Administration, including governance
• Benefits entitlements

8. Identifying and assessing claims and disputes

Companies should build awareness and understanding of the COVID-19 claims risk landscape. Claims can impact financial reporting in potential exposures at the reporting date and going concern considerations, along with the future viability of the company.

Key drivers of potential claims and contract consequences:

• Contractual delay, non-performance or breaches, wrongful early terminations – ‘domino’ effect of back to back contract failures
• Need to re-negotiate the contract price, delivery obligations, payment obligations or other key commercial provisions
• Failure to recover business impact from insurance contracts (rightly or wrongly)
• Distressed businesses seeking any remedy for survival or liquidity
• Failures in segregation of duties and normal activity/supervision, affecting service levels, product quality and compliance
• Increased regulatory and investor scrutiny on conduct, behaviour and disclosure before, during and after the crisis
• Merger & acquisition (M&A) transactions with accounting warranties or price adjustment mechanisms

9. Mitigating risks related to defined benefit pension schemes

Relevant issues for companies that sponsor financially significant UK defined benefit (DB) pension schemes:

• Balance sheet volatility: COVID-19 driven economic impacts on scheme assets and liability measures impacting balance sheet values for March and later year ends.
• Consider strategies for eliminating future volatility.
• Maintaining liquidity: temporary suspension of payments to pension schemes possible under urgent guidance from the pensions regulator.
• Avoid nasty surprises:
  • Missing a payment to the scheme without agreement can accidentally trigger significant adverse consequences.
  • The scheme must be treated ‘equitably’ with other stakeholders – shareholders, lenders, creditors.
  • Other corporate actions you may need or want to take in the current crisis likely require consultation with scheme trustee – e.g., obtaining secured debt.
• A good line of communication with trustees is key.
• Prepare for the next scheme valuation, which may be harder to agree with more conflicting pressures on cash.

10. Looking to the future and the economic outlook

As we look beyond COVID-19, it is important to understand the potential implications on our economy that will impact the viability of all companies.