Written by: Keith Tully
Published: 18th February 2020
British companies have been told that they should outline the potential impact of coronavirus on their financial performance in their end of year accounts.
The virus has become a major health risk on a global scale in recent weeks and millions of people in China are having their movements controlled as efforts are made to control the outbreak.
UK firms with significant interests or operations in China are being advised to pay particularly close attention to how they could be impacted by the situation during the current financial year.
The Financial Reporting Council (FRC), which regulates financial reporting throughout the UK, has pointed out that companies have a legal obligation to disclose details of the main risks and uncertainties they face as businesses.
The suggestion from the regulator is that for some companies based in the UK those risks will now include issues relating to coronavirus and the potential for staff shortages and production delays.
The FRC has also said that other businesses, in addition to those with interests specifically in China, could also be impacted by the situation “depending on the extent to which the virus spreads” and those companies too should consider how the outbreak might affect their financial positions.
“Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic emerges,” said a spokesperson for the FRC.
“Companies will need to monitor developments and ensure they are providing up-to-date and meaningful disclosures to their shareholders when preparing their year-end reports.”
The FRC has said that it will be looking into the potential impact that the outbreak of coronavirus might have on auditors of Chinese subsidiaries of UK-based companies, who could be hampered in their work if the situation continues.
Apple has already made clear that its operations are being hit by the coronavirus situation is China, with the US consumer tech giant citing the outbreak as the key reason why its revenue performance in March will fall short of forecasts.
Factories and shops in many parts of China have had to close in recent weeks due to the virus outbreak, with the Hubei province at the epicentre of the crisis having been put on full lockdown by local authorities.