Accounting Alerts

Executive summary

On June 23, 2016, the United Kingdom (UK) voted to leave the European Union (EU).  This Accounting Alert addresses some of the possible financial reporting implications of that decision.  The issues discussed are potentially relevant to all entities, although they are likely to be particularly significant for entities operating in the UK and the rest of Europe.

Background

The UK held a referendum on June 23, 2016 to decide whether the UK should leave or remain in the EU. Leave won by 52% to 48%. Once the UK delivers formal notice of its intention to leave the EU under Article 50 of the Lisbon Treaty it will have two years to negotiate its withdrawal.

Financial reporting implications

It is difficult to predict the long-term implications of the UK’s decision as this will depend on the specific results of the withdrawal negotiations and the reactions of policy makers, investors and central banks around the world.  What we do know is that the outcome of the referendum has already contributed to considerable currency and stock market volatility with the pound touching a 30-year low against the dollar in the immediate aftermath (retreating slightly from this low at the time of writing).

In addition to recent market volatility, the governor of the Bank of England has made it clear that, in his view, the UK’s economic outlook has deteriorated as a result of the vote and some economic intervention is likely to be required in the near term.  How these events might impact a company will depend on key factors including the number of transactions with EU-based customers and suppliers and the degree to which any downturn might impact demand for a company’s products.  The table (to view this table, please download the PDF at the bottom of the page) highlights some of the possible financial reporting implications arising from recent events.

For all companies, maintaining a focus on clear disclosure, in particular relating to risk and sensitivity analyses, will be key.

P&A Accounting Alerts are issued to keep our clients updated with the latest developments in financial reporting.  These are not intended to be a substitute for professional advice.  If you would like to unsubscribe, or add a colleague or a friend to our mailing list, please let us know by return e-mail.  For inquiries and suggestions on how the Accounting Alert may be even more useful to you, e-mail Mabel.Comedia@ph.gt.com or Jerald.Sanchez@ph.gt.com or call 988-2288.