Financial Reporting News

FINANCIAL REPORTING
Financial Reporting News

Reporting Periods

For reporting periods ending on or before 31 December 2021, the war is considered to be a non-adjusting event. As the Russian invasion occurred after the reporting date, the effects of the conflict should not be reflected in the financial statements, other than by disclosing the effect of the non-adjusting event were material.

For reporting periods ending on or before ending 24 February 2022 the consequence of the invasion becomes adjusting events and preparers must consider how sanctions and related effects could impact their financial statements, for example uncertainties regarding going concern, Impairment of assets, the effect expected for irrecoverable debts for receivables , classification of liabilities as current versus non-current and additional disclosures regarding assumptions.

Going Concern

In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the date when the financial statements are authorised for issue. For example, for the year ending 31 December 2021, even though the significant impact on the financial statements occurred after year-end, management will need to consider the appropriateness of preparing financial statements on a going concern basis and will need to take into consideration the existing and expected effects of the current situation on the entity’s activities, if the effects of the invasion are so significant that an entity’s management has determined it intends to liquidate the entity or cease trading, or that there is no realistic alternative but to do so, then the financial statements would not be prepared on a going concern basis (FRS 32.7A), even though the event occurred after the period end.

Reporting implications for financial statements for reporting periods after the Balance Sheet Date

Events after the end of the reporting period both favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue should be disclosed disclosed as non-disclosure would affect the ability of the users to make proper evaluations and decisions.

There are two types of events those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the end of the reporting period)and) those that are indicative of conditions that arose after the end of the reporting period (non-adjusting events after the end of the reporting period (FRS 102.32.2).

If events are deemed to be adjusting events an entity shall adjust the amounts recognised in its financial statements, including related disclosures, to reflect adjusting events after the end of the reporting period. (FRS 102.32.4). If events are deemed to be non-adjusting events an entity shall not adjust the amounts recognised in its financial statements after the end of the reporting period. (FRS 102.32.6) these events are disclosed were material

War in Ukraine – considerations for financial reporting

The events following the war in Ukraine has led to many additional considerations and financial reporting issues for practitioners. The focus of this news piece is the accounting implications of the war in Ukraine for practitioners when applying FRS 102.

Disclosures

When management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern. (FRS 3.9).