COVID-19 - impact on UK financial reporting

In these unusual times, unprecedented changes have been made to the rules around the reporting of financial results and holding general meetings. This insight reflects:

• a joint statement from the FRC and FCA confirming that the temporary measures relating to publication of financial statements continue to be available for financial periods ending before April 2021; and
• an AIM Issue confirming that the London Stock Exchange’s previously announced temporary measures for reporting deadlines in relation to the publication of audited annual results and half-yearly reports remain in place.

See below for the details.

FRC/FCA guidance on preparation of accounts

On 27 January 2021, the FCA and FRC published a joint statement reminding companies of certain continuing temporary reliefs for reporting published financial information. The FCA and FRC are encouraging all stakeholders (and in particular boards of listed companies) "to (1) re-familiarise themselves with the measures; and (2) use them in light of any resourcing constraints in finance and/or audit teams to ensure the quality of reporting is not compromised during this period."

Listed companies have been given:

• an additional two months to publish their annual accounts if they want to -- so they can be published within six months of the year end instead of four. This is permissive, so companies can take the extra time if they need it but can also proceed on their original timetable; and
• an additional month to publish their interim results -so they can be published within four months of the half year instead of the usual three months.

The DTRs normally require issuers to request a suspension of their listed securities if they do not meet the four-month deadline. But the FCA has stated that, provided the audited annual financial reports are published within six months, it does not expect an issuer to request a suspension of its securities, nor will the FCA take any steps unilaterally to suspend the listing for breach of the DTRs (though it reserves the right to take this action if necessary for other reasons). Issuers will also not face enforcement action for breach of DTR 4.1.3R (which requires an issuer to make public its annual financial report at the latest four months after the end of each financial year).

These temporary reliefs will remain in place until the disruption abates but , at a minimum, for financial periods ending before April 2021 and the FCA will give companies notice when they decide to bring these measures to an end.

The automatic extension of the accounts filing deadline by three months (to 9 months for public companies) ends on 5 April 2021. But companies will be able to apply to Companies House for an extension and will be granted a discretionary 3-month extension if they cite coronavirus as a factor impacting the timely completion and/or audit of accounts. Only one filing extension is allowed in an accounting period and the extension cannot take the filing date later than 12 months after the end of the accounting period.

See Extension of rules that temporarily ease company meeting for more information about AGMs.

The joint statement also reminds companies about the:

• updated and consolidated Guidance for companies published by the FRC on 4 December 2020; and
• the FRC's year-end letter to CEOs, CFOs and Audit Committee Chairs. 

The FCA also published a summary of temporary reliefs for companies reporting published financial information and some Q&A.

Inside AIM

Inside AIM, published on 27 January 2021, confirms that the London Stock Exchange's previously announced temporary measures for reporting deadlines in relation to the publication of audited annual results and half-yearly reports remain in place until further notice. These allow AIM companies to apply to AIM Regulation for a three- month extension to the reporting deadline for the publication of their annual audited accounts pursuant to AIM Rule 19. The request for an extension must be made to AIM Regulation by the nominated adviser, before the AIM company's current AIM Rules reporting deadline.

AIM companies are also allowed an extra month to notify their half-yearly report under AIM Rule 18 -- so that they will have four months from the end of the half year instead of three. An AIM company wanting to do this must notify its intention to do so via a RIS before its reporting deadline, and its nominated adviser must separately inform AIM Regulation.

As noted above, the automatic extension of the accounts filing deadline by three months (to 9 months for public companies) ends on 5 April 2021. But companies can still apply to Companies House for an extension.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.