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The focus on communication of the implications exit scenarios, and is the tone and balance of the
of the referendum result also extends into the discussion appropriate? Companies are not required
financial statements. Disclosures of accounting to quantify potential future performance impacts,
judgements, sources of estimation uncertainty but should provide relevant factual information to
and financial instrument risks may also need enable users to form their own assessment, for
to be revisited. We may well see increased example through business model disclosures.
disclosure of sensitives of estimates to changes in
assumptions—and of more key assumptions being Accounting in an environment of uncertainty
identified for disclosure. and market volatility

Though challenging, articulating the potential Uncertainty and volatility put particular pressure on
impact on the business model and longer-term financial statement measures and forward-looking
strategy with as much clarity as possible will be assessments such as asset valuations, inventory
more important than ever during this period of values, consideration of onerous contracts, deferred
uncertainty. tax asset recognition, recoverability of receivables,
hedge effectiveness testing and even the going
Companies should consider whether their front-end concern assessment and covenant compliance.
narrative provides sufficient information to allow
the implications of uncertainties, exit terms and Perhaps the greatest focus will be on impairment tests.
strategic responses to be assessed. There are various factors to consider, for example:

Does reporting provide sufficient information to — Updating cash flows in value in use calculations:
enable shareholders to assess the implications of while long term implications may not be clear,
and there are limitations on taking any planned
restructurings into account, cash flow forecasts
Narrative reporting may still need updating to reflect changes in
the competitive environment, growth rates or
Risks Response Clarity exchange rate implications.

— Determining discount rates: incorporating
Viability Assessment Assumptions
changes in risks and market conditions.
Prospects Expectation Implications
— Determining which assets are tested for
impairment: do changes in the market, or in
Financial statements internal expectations mean that more assets
need to be tested for impairment?
Uncertainty Estimates Projections
Valuations of assets or liabilities, such as properties,
Disclosure Clarity Sensitivity pension balances, or financial instruments will also
be affected by market activity and so particular
Valuations Assumptions Information focus on the approach taken and assumptions used
can be expected.

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