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Companies must disclose in their year-end financial reports potential impacts—such as deferred taxes and inventory values—of the U.K.'s decision to split from the European Union, according to accounting firm KPMG.
Although Brexit terms remain under negotiation, the near surety of it may present certain financial reporting tasks, depending on where a company operates, Jennifer Yruma, a KPMG LLP director, suggested in a Jan. 4 webinar by the firm.
Companies required to file financial reports with the U.S. Securities and Exchange must disclose “known events or uncertainties that may affect liquidity and capital resources” because of Brexit, Yruma said.
The Brexit vote “could affect year-end reporting,” Yruma said. “It could affect valuation considerations, for assets such as inventory, deferred taxes, receivables.”
The decision to leave the EU also could affect the effectiveness of “hedging” strategies, she said. Such hedging contracts typically hinge on the use of derivative financial instruments.
Brexit could even affect the assessment by companies of whether they will continue to be a going concern, Yruma said.
Companies should also consider the need for possible changes in their risk disclosures because of Brexit, Yruma said . Those disclosures would focus on “risks and uncertainties,” she said.
As part of a slide presentation in the webinar, KPMG accountants also noted that Brexit could present financial reporting implications for reporting of profitability of executory contracts and compliance with debt covenants.
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