Whist the newspapers have understandably been full of information about the coronavirus, now formally called COVID-19, you might not have expected to see anything with an audit and accounts relevance. However, on the 18th February 2020 the FRC issued a notice containing advice for companies and their auditors regarding the impact that the virus might have on accounts, especially during the current reporting season.
The guidance is brief, but highlights that the lack of movement of goods and people and difficulties with production or supply chains might create risks for companies that need disclosure. In particular, for those with links with areas already heavily affected, principal risks might well need to be updated to include the impact and mitigating actions that a company is taking.
Companies with production facilities in China or nearby may be significantly adversely affected. Apple, for example, have already stated that revenue will be hit due to difficulties with both production and sales in China. But service companies may also be affected, - think conference organisers, or travel companies, for example.
As well as disclosures, companies might need to consider if the impact of the virus provides an indication of impairment which thus triggers an impairment review. For companies with December year-ends this will generally be a non-adjusting post balance sheet event, although if the company is no longer a going concern due to these events, then it becomes an adjusting event.
Of course not all companies will currently be impacted in a material manner and for those, it will be a matter of being aware of the potential risks and taking sensible steps to tackle these.
In closing, it is interesting that the FRC has chosen to issue this advice, which some might think is self-evident, but given the travails that the FRC has had over the past few years it is perhaps not surprising that they want to be seen to be proactive. Perhaps in future we will see more FRC reminders of potential current areas of risk and we will certainly see plenty of scrutiny of disclosures in accounts. In the meantime let's not forget the human impact of the virus and hope that things soon improve for those badly affected.