Statement of Policy: Delaying annual company accounts during the coronavirus crisis

Mar 26th '20

Companies and their auditors currently face unprecedented challenges in preparing audited financial information as a result of the coronavirus pandemic. In response to the current situation, the Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) are announcing a series of actions to ensure information continues to flow to investors and support the continued functioning of the UK’s capital markets.


  • Temporary relief

As part of this wider initiative, the FCA has announced temporary relief for listed companies facing the challenges of corporate reporting during the coronavirus crisis.


This temporary relief will permit listed companies which need the extra time to complete their audited financial statements an additional 2 months in which publish them. Currently, under the Transparency Directive, companies have 4 months from their financial year end in which to publish audited financial statements. Under the temporary relief announced today we will, among other things, forbear from suspending the listing of companies if they publish financial statements within 6 months of their year-end.


More detailed additional information on the duration, scope and applicability of this temporary relief are set out below under Policy Detail.  Further information is set out in a Q&A which is available on the FCA website.


During this period, it is as important as ever that the market is kept up to date with information. The Market Abuse Regulation (MAR) remains in force and companies are still required to fulfil their obligations concerning inside information as soon as possible unless a valid reason to delay disclosure under the regulation exists. Companies must continue to assess carefully what information constitutes inside information at this time, recognising that the global pandemic and policy responses to it may alter the nature of information that is material to a business’s prospects.


  • Utilisation by companies of the additional time

The coronavirus pandemic is causing companies of all types to re-think and re-plan almost all aspects of their business and operations. The FCA recognise that some companies, given the nature of their operations, may feel it appropriate to maintain the 4 month calendar, but urge all those companies that feel it appropriate to utilise the additional 2 months to do so. The FCA urge market participants not to draw undue adverse inferences when companies make use of the extra time our temporary relief gives them. For a great many companies it will be a sensible decision to make in unprecedented times.


  • Market practice on reporting calendars more broadly

Although these measures represent an important relief for companies and auditors at this time, regulation is only part of the solution. It is equally important that market practice adjusts. In UK markets, it is common to publish year-end financial information, often in the form of preliminary statements of final results, well in advance of the 4 months required by the Transparency Directive. Markets often draw adverse inferences when companies move results announcements.


The coronavirus pandemic is causing companies of all types to significantly adjust their business and operations. As part of this, listed companies will inevitably have to re-think their financial calendars. The FCA strongly recommend that listed companies review all elements of their timetables for publication of financial information in order to make appropriate use of the time available within regulatory deadlines to ensure accurate and carefully prepared disclosures.


Financial reporting is important, and the practical challenges of completing financial statements during the coronavirus pandemic are significant. Companies and auditors should be granted time. Without a shift in market practice, the relief the FCA and partner agencies are announcing will not be effective.


  • Moratorium on preliminary statements of account

On 21 March 2020, the FCA published a statement requesting companies observe a moratorium of at least 2 weeks on the publication of their preliminary statements of account (‘prelims’). They confirmed they were in talks with the FRC and PRA on a package of relief measures, a dialogue which has led to today’s joint announcement.


The FCA can confirm that the moratorium can end on 5 April 2020.


Though voluntary, the moratorium has been well observed. It has given companies with pre-scheduled results announcements the opportunity to absorb recent events and give them due consideration as they prepare their disclosures.


The FCA still believes the practice of issuing financial statements earlier than required will add unnecessarily to the pressure on companies and the audit profession at this moment. However, they believe that pressure can abate as companies react to the need to re-think and re-plan financial calendars in light of the coronavirus pandemic and the package of measures the 3 regulators are announcing.


  • Policy details

Issuers subject to DTR4 are required to publish their annual financial reports within 4 months of their financial year-end (DTR 4.1.3R).  If they do not meet this deadline, the Authority expects issuers to request a suspension of their listed securities.  Should the request not be forthcoming, the FCA is able to impose a unilateral suspension if the smooth operation of the market is, or may be, temporarily jeopardised or it is necessary to protect investors (section 77 FSMA and LR 5.1.1R).


Under FCA forbearance, provided the audited annual financial reports are published within six months, the Authority do not expect an issuer to request a suspension of their securities if they breach DTR 4.1.3R.  Nor will the FCA take any steps to unilaterally suspend the listing for breach of DTR 4.1.3R (though they reserve the right to take this action if necessary for other reasons).


Issuers subject to FCA rules will not face enforcement action for breach of DTR 4.1.3R provided that they publish their results within 6 months of their financial year-end.


This will, in effect, extend the deadline by a 2 month period.


  • Duration

This policy is intended to be temporary while the UK faces the extreme disruption of the coronavirus pandemic and its aftermath. The FCA will keep its application under review. When the disruption abates they will announce how they will end the policy in a fair, orderly and transparent way.


Source: FCA