FD Intelligence

Potential financial reporting implications of Brexit

Our IFRS alert is potentially relevant to all entities but particularly so for entities operating in the UK and the rest of Europe.

It is difficult to predict the long-term implications of the UK's decision to leave the European Union, as these will depend on the specific results of the withdrawal negotiations and the reactions of policymakers, investors and central banks around the world.

What we do know is that the outcome of the EU referendum has already contributed to considerable currency and stock market volatility with the pound touching a 30-year low against the dollar in the immediate aftermath (retreating slightly at the time of writing).

Mark Carney, governor of the Bank of England, has also made it clear that, in his view, the UK's economic outlook has deteriorated as a result of the vote and some economic intervention is likely to be required in the near term.

How these events might affect a company will depend on key factors including the number of transactions with EU-based customers and suppliers, and the degree to which any downturn might affect demand for a company's products.

Our IFRS alert highlights some of the possible financial reporting implications arising from these recent events. For all companies, maintaining a focus on clear disclosure, in particular relating to risk and sensitivity analyses, will be key.