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How EY can help
Communicating through the annual report
Regulators have indicated they expect to see listed companies explain the effects of COVID-19 on past performance and expectations for the future. This will be even more important and need to be more detailed in the annual report.
At the same time, regulators are reminding listed companies to comply with the guidelines for non-GAAP measures (also known as Alternative Performance Measures) and not introduce key performance indicators that try to portray what performance might have been in the absence of COVID-19 as that would be highly judgmental.
Companies should therefore:
- Be factual and transparent when explaining the impact of COVID-19
- Disclose such impact both qualitatively and quantitatively in the Management Commentary (Management Discussion & Analysis) section of the annual report rather than the financial statements
- Avoid introducing new or amending existing non-GAAP measures
This is clearly an uncertain time for company finance functions and, indeed, for everybody else attempting to respond to an unprecedented health and economic crisis. The business impact has been huge and is ongoing.
Accurate and up-to-date financial information is crucial to maintaining trust and confidence in this period. The upcoming closing process will be more challenging this year and will require careful planning of resources in the finance function and in data gathering and analysis. Accounts preparers can learn from the experience of their peers, should be aware of the reliefs that are available and should monitor any updates to accounting standards.