COVID-19 annual reporting guidance for directors

The Australian Institute of Company Directors (AICD), Chartered Accountants Australia and New Zealand and CPA Australia have published a guide for directors and preparers of financial statements and auditors on the impacts of COVID-19 on annual report disclosures.

The guide provides a summary of the key considerations when assessing how best to disclose the effects of the COVID-19 pandemic in annual reports for the upcoming reporting season.

The guide has a disclosure perspective, and ranges from key principles to assessment of going concern.  In doing so, the guide is structured to assist both listed and unlisted entities, including not-for-profits, charities and SMEs.

The guide provides assistance on the matters to talk about in their directors’ reports, and operating and financial reviews to ensure alignment with the financial statements.  With investors increasingly looking for additional disclosure and transparency, particularly around the impact on operations and financial position, directors need to ensure financial statements continue to be meaningful, relevant and timely.

The press statements that accompanied the launch of the guide noted that:

• Company directors are facing their toughest financial reporting season in decades – with investors and stakeholders seeking clarity, while directors are grappling with the uncertainty created by the pandemic and accompanying recession.  This is very challenging in a modern reporting environment given the level of disclosure that is now required and expected (and the consequences of getting it wrong).
• For those who are subject to continuous disclosure obligations – the week to week volatility requires directors to make fine judgment calls and the guide assists those making such disclosures grapple with that difficult task.
• Forward-looking disclosures will be particularly difficult – and it should be expected that companies will acknowledge the elevated level of uncertainty.  (Companies may also consider providing any detail of scenario modelling they have performed on COVID-19 impacts in their reports).

A copy of the guide can be accessed here:  http://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/covid19/07641-1-adv-impacts-of-covid19-on-annual-report-disclosures-guide-a4-58pp-web.ashx

Further information

If you would like more information about any of the matters discussed in this note, please contact me.