Financial reporting under Covid-19

Companies are facing many uncertainties connected with the COVID-19 outbreak. These are affecting their current situation and are also likely to affect their prospects for a considerable period of time. This series looks at financial reporting changes under Covid-19 and what the impact will be on:

  1. Financial Statements and Auditors’ Reports
  2. Declaring dividends
  3. Reporting the Job Retention Scheme within company accounts
  4. Job Retention Scheme and the impact on salaried directors

For any further questions please don’t hesitate to get in touch with a member of our MHA Moore and Smalley team.

The Impact of COVID-19 on Financial Statements and Auditors’ Reports

This guide sets out the factors that need to be considered and addressed when preparing the annual financial statements of a company in the current circumstances, and the potential implications for the audit report.

We go in to detail about:

  • Financial reporting
  • Accounting treatment
  • Disclosure within the financial statements
  • Auditors’ reports and possible outcomes
  • Decisions

Reporting the implications of Covid-19 – Declaring dividends

Company directors are having to make unprecedented decisions concerning the workforce, the suspension of activities, and whether to use government assistance (e.g. loans, grants and the government job retention scheme).

Against this background there might be continued pressure from shareholders for a company to maintain its existing dividend policy, or otherwise return what might be considered excess cash. Directors may also be tempted to maintain market expectations.

Many listed companies have cancelled dividend payments and share buy backs, but some companies have continued to pay large dividends to shareholders, thus attracting press attention.

This article focuses on fundamental issues that UK company directors must take into account before declaring dividends in the current economic environment, and goes in to detail on:

  • The key considerations for dividends
  • Questions that a board should ask when declaring dividends
  • The timing of dividends

Reporting the Job Retention Scheme within company accounts

The Coronavirus Job Retention Scheme is where eligible employers can claim to cover the wages of employees who are on temporary leave (“furlough”) due to the impact of Covid-19.

Businesses are electing to either not use the scheme, employ the scheme in full, or apply the scheme in part.

This factsheet focuses on the accounting and reporting implications for UK companies and limited liability partnerships (“LLPs”) who are using the Job Retention Scheme. The information will help preparers draft appropriate accounting policies under UK GAAP and EU adopted IFRS (“IFRS”).

UK Government Job Retention Scheme and impact on salaried directors

Following the previous factsheet, this focuses on the implications of the Coronavirus Job Retention Scheme from the perspective of salaried directors of companies incorporated under the Companies Act 2006.

This factsheet includes information on the special considerations regarding directors, disclosure in financial statements, and a reminder of the statutory duties of a director.