With little sign of substantive progress in the negotiations on the future of the UK-EU relationship, UK companies must once again consider preparing for the possibility of a no-deal or “minimal deal” scenario at the end of the transition period (31 December 2020). An immediate issue for UK companies is how the expiry of the transition period will affect their corporate reporting obligations – both financial and non-financial – many of which are currently derived from EU law.
Financial reporting is naturally of central importance to investors. UK companies will be keen to ensure that any move by the UK towards its own national accounting standards does not leave UK companies at odds with internationally accepted standards to their detriment. The UK will require UK companies with shares admitted to trading on a UK regulated market to adopt “UK-IAS”. In the first instance though, there should be little or minimal change since UK-IAS will be virtually identical to EU-IFRS at least immediately following the expiry of the Brexit transition period.
Possibly an even more pressing matter for companies is the shape of the non-financial reporting landscape given the increasing demand for non-financial information from a multitude of different stakeholders. Recent EU developments in this area may well influence the shape of global standards in non-financial reporting. The question is whether the UK will align itself with the EU reporting regime or go its own way.
This briefing considers the state of play for UK companies immediately following the Brexit transition period and how that is likely to develop beyond 2021. Particular attention is paid to the wide-ranging and ongoing development of the “ESG” reporting framework on a global, EU and UK level. From the perspective of both financial and non-financial reporting, it would appear that the position for UK companies will be one of ongoing substantive alignment with the EU framework in the post-Brexit world.