Boards and their advisors will need to consider how the spread of coronavirus will affect the governance and operations of their business including risk, internal controls, financial reporting, audit and assurance and other regulatory and corporate reporting requirements. The extent of the risk arising and the impact it may have will vary depending on the company’s specific circumstances and exposure. Over recent weeks, much has been issued in terms of advice from regulators, and commentary, regarding various financial reporting considerations related to the spread of coronavirus. The challenge is to stay ahead of what is a very fast-moving situation. We are regularly producing webinars and articles bringing relevant updates and expert insights to our members. For example, our Covid-19 crisis: Advice to boards and organisations webinar scheduled on 1 April. We have assembled below some information that we have come across that may be of assistance to members. Commentary should not be taken as advice or as a comprehensive analysis of all aspects. This is a rapidly evolving situation. When reading information at the links below, due care should be taken of the date of issue and any developments in the interim that may not be reflected in the material published, such as updated statements from regulators etc. Our members’ expertise, judgement and experience are now invaluable to guide each organisation on their unique journey through this crisis. We encourage all our members to remember that your first responsibilities are to yourself and ensure that you stay well. Take some time to review the member resources offered by Chartered Accountants Ireland in relation to wellbeing and building personal resilience at CA Support. In the meantime, remember that your Institute are here to help you. If there are specific issues where you need help, or if you want to share ideas or insights, please contact us at either firstname.lastname@example.org or +353 1 637 7382. From the regulators Link UK Financial Reporting Council (FRC), Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) announced a series of actions (26 March 2020) to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets. Joint Statement UK FRC Guidance for companies on Corporate Governance and Reporting (Company Guidance Update March 2020 (COVID-19)) – contains guidance on corporate governance matters such as risk management an internal controls, management information, estimates and forecasts, dividends and capital maintenance, Directors/strategic report, viability statement and going concern and some key financial reporting considerations. Corporate governance and reporting guidance European Securities and Market Authority (ESMA) issued a public statement Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive. ESMA Public Statement The Irish Government’s Department of Business, Enterprise and Innovation have produced a business continuity planning checklist of preparatory actions in responding to Covid-19. Business Continuity Planning Checklist The Irish Data Protection Commission and the UK Information Commissioner’s Office highlight some important considerations regarding data protection in the Covid-19 crisis. ROI Data protection considerationsUK Data protection considerations European Banking Authority (EBA) have issued a statement on actions to mitigate the impact of COVID-19 on the EU banking sector. EBA statement of actions Charities Regulator (Republic of Ireland) have published answers to several frequently asked questions around regulatory reporting and governance matters affecting Charities during the Covid-19 crisis Charities Regulator Frequently Asked Questions The Charity Commission for Northern Ireland have published updates on regulatory reporting, advice regarding charity meetings, serious incidents reports and accounting matters The Charity Commission for Northern Ireland update Chartered Accountants Ireland are engaging with government agencies, regulators and the Revenue authorities, North and South, around the impact of the COVID-19 outbreak, and potential issues with filing deadlines, payments etc. Their responses and links to information are regularly updated on our technical and business updates section. Technical and business updates From professional bodies/organisations Guidance issued on guidance on Annual General Meetings (AGMs) in the UK and impact of Covid-19. The guidance was produced by law firm Slaughter and May and The Chartered Governance Institute, with the support of the Financial Reporting Council, GC100, the Investment Association and the Quoted Companies Alliance. Covid-19 AGM Guidance Chartered Accountants Ireland have assembled some information relating to the financial reporting implications of Covid-19. This may be of assistance to board members, audit committees, finance committees and advisors. Financial reporting implications of Covid-19 Articles and other resources to assist boards and their advisors are available on Chartered Accountants Ireland’s Governance Resource Centre and Webinars microsite. Governance Resource CentreWebinars Accountancy Europe published (20 March 2020) Coronavirus crisis: implications on reporting and auditing, exploring going concern, post balance sheet events reporting, impact on estimates and judgements and implications for the audit report. Coronavirus crisis: implications on reporting and auditing Other related information Ireland’s national association of community and voluntary organisations, charities and social enterprises, The Wheel, have compiled details of several fundraising resources for Irish non-profits and community groups. Fundraising information and resources for non-profits during Covid-19 This page was last updated on: 27 March 2020
The Government announced on 24 March that the current Employer COVID-19 Refund Scheme is being replaced by a new scheme, the Temporary COVID-19 Wage Subsidy Scheme, from Thursday 26 March. The existing Employer COVID-19 Refund Scheme was an emergency scheme from the Department of Employment Affairs and Social Protection (but administered by Revenue) where employers were able to make an emergency payment of €203 per week to employees who would otherwise have been laid off. The new Temporary COVID-19 Wage Subsidy Scheme is a completely different scheme from Revenue to directly subsidise an employee’s salary. The new Temporary COVID-19 Wage Subsidy Scheme Under the new scheme, Employers will be able to make a tax free payment to employees that is the equivalent 70% of their average after tax pay for which they will receive a direct subsidy from Revenue. This subsidy is capped at a maximum of either €350 or €410, depending on what the average after tax pay ends up being. As this average goes up, the available subsidy goes down. After tax pay is defined as gross pay: PAYE – USC – PRSI (EE). The average value for this after tax pay is based on the submissions made to Revenue for the employee between 1 January and 29 February 2020 In addition to this, employers will be able to make an additional top-up payment of up to 30% of the after tax pay, however, this top-up amount is subject to PAYE, USC and PRSI at J9 rates. Employers who top up by more than 30% will have their subsidy reduced on a like-for-like basis, so for every euro above the 30% amount, the employer will receive a euro less from Revenue by way of a subsidy. The following outlines the calculations involved: How is it being implemented by Revenue? This scheme is going to be implemented in two distinct phases: Phase I – 26 March to 20 April Employers will be required to calculate what each employee’s average after tax pay is based on the submissions made to Revenue in the period from 1 January to 29 February 2020. The employer then calculates the tax-free COVID-19 payment as 70% of the average after tax pay. This tax-free COVID-19 payment is limited depending on the average after-tax pay as outlined below: Average pay from €0 to €586 limits it to €410. Average pay from €586 to €960 limits it to €350. Average pay above €960 is not entitled to the subsidy. Having established the value of the tax-free COVID-19 payment, the employer is now ready to decide if they are going to make a top-up payment. As outlined earlier, this top-up is subject to PAYE, USC and PRSI at class J9. A top-up payment higher than 30% of the average after tax pay will reduce the amount of subsidy that Revenue will pay on a euro-for-euro basis. If you breach the 30% limit by €50, Revenue will reduce your subsidy by €50. In Phase I, Revenue will automatically pay a subsidy of €410 per week for every J9 submission received, even if the amount of the tax free COVID-19 payment is less than that. The important point to note here is that Revenue always refunds €410, even though you may have actually paid the employee less than that under the scheme.Phase II – After 20 April In Phase II, Revenue will have introduced a new PAYE Modernisation payroll submission process that will enable employers to report the exact amount paid to the employees under the scheme. Revenue will then issue the subsidy payments based on these new employer submissions and the amounts paid by Revenue will match the amounts paid to employees.What happens after that? At this stage, all we can say is that Revenue plan to reconcile all subsidies down to the last euro, and employers will be required to account for all subsidies claimed under the scheme. In Phase I, Revenue will pay a subsidy of €410, regardless of what you pay your employees. Where you have paid less to your employees, Revenue will want their money back and you will need to account for this. Phase II will see more control over the amount of subsidies paid, but it is still possible that some employees who have more than one employment may receive payments higher than what they are entitled to receive. In these cases, Revenue is likely to claw this back from employees via their end of year statements. This is a complicated scheme which has been developed in a very short space of time. It is not perfect, but it is aimed at enabling employers and employees to make it through this current crisis. Employers will find Revenue to be relatively sympathetic in cases where they have made honest mistakes in how they have operated the scheme. However, any employer who tries to take advantage of the scheme will be asked to account for their actions and cannot expect any sympathy from Revenue or the Irish taxpayer. If you need further help with your payroll and advice on the Temporary COVID-19 Wage Subsidy Scheme, contact CollSoft Payroll. (This article is sponsored by CollSoft Payroll.)
Last evening (Thursday 26 March) legislation was passed in the Dáil to provide for the operation of a Wage Subsidy Scheme for employers. The legislation provides that key aspects of eligibility for the scheme are largely to be determined by Revenue guidance, and this guidance was published late last evening. In the interests of delivering a rapid economic recovery after the current crisis we are recommending that our members examine closely and if appropriate avail of the scheme for their own and/or their clients’ businesses. The eligibility for the self-assessment scheme depends on ‘significant negative economic disruption on the employer due to Covid-19’. A qualifying employer must declare that it is significantly impacted by the crisis. According to Revenue this means that the employer’s turnover is likely to decrease by 25 per cent for quarter 2, 2020; that the business is unable to meet normal wages or normal outputs. That a business has significant cash reserves will not necessarily disqualify it from the scheme. According to Revenue, eligibility will initially be determined, largely on the basis of self-assessment and declaration by the employer concerned, combined with a risk focused follow up verification by Revenue. The Scheme is available to employers across all sectors excluding the Public Service and Non-Commercial Semi-State Sector. Key indicators of ‘significant negative economic disruption’ are that the employer’s expected turnover is likely to decrease by 25 per cent for quarter 2, 2020. Revenue outline that the employer is best placed to determine this and may base this judgement on the decline in orders in March 2020, in comparison to February 2020, or the likely turnover for the quarter compared to Q1 or if appropriate Q2, 2019, or on any other basis that is reasonable. The scheme is confined to employees who were on the employer’s payroll at 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020. Employees who were laid off after 29 February 2020 may be taken back onto the payroll for the purposes of this scheme. Read Revenue’s guidance here and Revenue’s FAQ document may be useful. Revenue’s other information and advice for taxpayers and agents is available here. We will continue to advise all members using the appropriate communication channels as soon as further clarifications and updates are received.
Practice Consulting writes With the impact of the COVID-19 pandemic, an urgent issue facing auditors of entities with March year-ends, and thereafter, is attendance at stocktakes. Non-attendance may result in the inability to obtain sufficient appropriate audit evidence, which may impact upon the audit opinion in the current and subsequent years. The purpose of this article is to provide guidance regarding stocktake attendance for audits of small and medium-sized entities with financial years ending on or after 31 March 2020 in the circumstances of the COVID-19 pandemic. The measures announced by the UK government and devolved administrations on 23 March 2020 and the recommendations of the Irish government to combat COVID-19 mean that travelling to and from work is only permitted or recommended where this is absolutely necessary and where the work cannot be done from home. Obviously, this has major implications for many businesses and their auditors. Reference to an International Standards on Auditing (ISA) below should be read as referring to the equivalent ISA (UK) or ISA (Ireland) as appropriate. Requirements of ISAs for attendance at stocktake The requirements for attendance at stocktakes are set out in ISA 501 Audit Evidence – Specific Considerations for Selected Items. If inventory is material to the financial statements, ISA 501 requires the auditor to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory, including “attendance at physical inventory counting, unless impracticable”. If stock is counted at a date other than the date of the financial statements, in addition to attendance at the stocktake, the auditor is required to perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded. If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions. If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ISA 705. Circumstances where attendance at the stocktake may not be practicable There are two main scenarios where it may be impracticable to attend the stocktake – The entity does not conduct a stock take at the year-end; or The entity conducts a stock take and the auditor considers whether it is practicable to attend. You should firstly contact the business to see whether management intends to conduct a stocktake and establish what plans are in place. The entity does not conduct a stock take at the year-end Since the start of the measures to combat COVID-19, a year-end stocktake may not be carried out by many businesses – The business may be required to be closed, and thus a stocktake may be unfeasible. In this case, you should gain an understanding of the reasons, consider whether you agree, and document why the stocktake is not being held, together with details of any alternative plans that are to be put in place. Alternatively, the business may not be required to close, but decides not to conduct a stocktake for reasons of employee welfare. You should carefully evaluate the reasonableness of management’s rationale for not performing the count and whether you agree, and document why the stocktake is not being held, together with details of any alternative plans that are to be put in place. However, if you conclude that management’s explanations do not appear to be reasonable in the circumstances, then you should consider whether you need to request management to perform a stocktake. If they refuse, you should consider how this will impact upon your audit, including the risk assessment, including the risk of fraud, and your ability to obtain sufficient appropriate audit evidence.You should also consider whether there may be a requirement to report to any regulator or third party. Note that it may be possible for the entity to conduct (and the auditor to attend) a stocktake if restrictions are lifted and the entity re-opens before completion of the audit. Stock movement may have been largely frozen during the closure or it may be possible to perform procedures which roll back the stock to the year-end. You should discuss this possibility with the entity, to ensure that you receive sufficient notice of the stocktake to allow you to attend. If this happens, please note the requirements of paragraph 5 of ISA 501 to perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded. This would include appropriate cut-off tests. The entity conducts a stock take and the auditor considers whether it is practicable to attend Generally, when stock is material and a stocktake is held, the auditor attends the stocktake, unless it is impracticable to do so. In some circumstances, the auditor may conclude that it is practicable to attend, even in the current climate, but making sure to take into account that health and safety considerations are paramount. You may also consider taking the opportunity to carry out other audit procedures that need to be carried out at the premises, such as physical verification of fixed assets, bearing in mind that it may be difficult to subsequently gain physical access before the end of the audit. In other circumstances, you may conclude that attendance is not practicable, especially of this consideration is due to health and safety issues. The application material to ISA 501 states that “In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable.” It further states that “the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive”. It may be the case that you consider that restrictions on travel or staff safety make it impractical to attend, or indeed you may be prohibited from attending. In particular, it may be that certain members of your staff are in vulnerable categories and should not be asked to attend. You should carefully consider the facts and circumstances when assessing whether it is impracticable to attend the stocktake. If this is the case, you should document your reasons in your audit working papers. In some circumstances, it may be possible to observe the stocktake using remote technology, such live video-streaming and/or the use of drones or similar technology. This, along with other aspects of the issue around attendance at stocktakes in the current COVID-19 climate, is discussed in an Institute for Chartered Accountants of Scotland (ICAS) paper available at https://www.icas.com/professional-resources/coronavirus/icas-updates/icas-issues-guidance-for-auditors-on-attendance-at-stocktakes-during-the-coronavirus-outbreak. The limitations and risks attendant on using technology in place of actual attendance should be carefully considered. Alternative procedures If a stocktake was not attended, then ISA 501 requires you to perform alternative procedures to obtain sufficient appropriate audit evidence. The application material to ISA 501 suggests as an example that “inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory”. Other alternative procedures may be available. In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ISA 705 (Revised June 2016) Modifications to the Opinion in the Independent Auditor’s Report requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation. Implications for the audit opinion At the end of the audit, you will need to consider the impact of non-attendance at the stocktake on your auditor’s report, in particular whether you have obtained sufficient appropriate audit evidence. If you conclude that you have not, a qualified opinion or disclaimer of opinion may be appropriate. Please refer to ISA (UK) 705 (Revised June 2016) Modifications to the Opinion in the Independent Auditor’s Report. This standard addresses the implications of limitations on the scope of the audit. In the circumstances described above, a limitation on the scope of the audit may arise from circumstances beyond the control of the entity (such as when you conclude that a stocktake is not feasible, or that it is not practicable for you to attend) and limitations imposed by management (such as when a stocktake does not take place and you disagree with management’s decision not to conduct a count, or to prevent you from attending). This matter may also interact with other audit issues, such as other scope limitations and uncertainties, such as going concern, which may further impact the auditor’s report.
Companies and their advisors will need to consider how the spread of coronavirus will affect their business and how these effects should be reported in their financial statements and directors report. The extent of the risk arising and the impact it may have will vary depending on the company’s specific circumstances and exposure. The company’s year-end date, and the information available from the rapidly evolving situation will also affect how the impact will be reported in the financial statements. Over recent weeks, much has been issued in terms of advice from regulators, and commentary, regarding various financial reporting considerations related to the spread of coronavirus. We have assembled below some information that we have come across that may be of assistance to members. Commentary should not be taken as advice or as a comprehensive analysis of all aspects. This is a rapidly evolving situation. When reading information at the links below, due care should be taken of the date of issue and any developments in the interim that may not be reflected in the material published, such as updated statements from regulators etc. There is also a need to be cognisant of the accounting framework being applied by an entity (e.g. FRS 102, IFRS etc.), and the jurisdiction, in considering the relevance of any of the information below. From the accounting standard setters/regulators: The FRC has published guidance for companies (26 March 2020) preparing financial statements (‘Company Guidance Update March 2020 (COVID-19)’) and a bulletin for auditors covering factors to be taken into account when carrying out audits during the current Covid-19 crisis. Previously the FRC had issued advice for companies and auditors on disclosure of risks and other reporting consequences arising from the emergence and spread of COVID-19 (18 February 2020). IAASA has published news articles noting the issuing of: the ESMA public statement (27 March 2020) promoting co-ordinated action by National Competent Authorities regarding issuers’ obligations to publish periodic information for reporting periods ending on or after 31 December 2019 in the context of the COVID-19 outbreak (see below); the ESMA public statement (25 March 2020) on the financial reporting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9 Financial Instruments (see below); and an earlier ESMA public statement addressing actions that market participants have to take in relation to the COVID-19 outbreak in order to preserve investor protection, the integrity of markets and financial stability (12 March 2020). From professional bodies/organisations: The Institute’s Practice Consulting Team recently held a webinar to assist members in practice (24 March 2020) on ‘Accounting Issues Arising from the COVID-19 Outbreak’, and the link will be available here. ICAEW’s guide, ‘The financial reporting implications of coronavirus under UK GAAP’ (9 March 2020), is aimed primarily at entities preparing financial statements in accordance with FRS 102. ICAS’s article ‘Coronavirus and its impact on financial reporting’ (18 March 2020) summarises some of the areas to be considered by entities when producing their financial statements in this uncertain period, referring to both FRS 102 and IFRS. In their publication ‘Coronavirus crisis: implications on reporting and auditing’ (20 March 2020), Accountancy Europe explores coronavirus’ effects on accounting and reporting for companies as of 31 December 2019 and accounting and reporting for companies with year-ends in 2020. Material from some of our member firms or their international networks: Several of the Institute’s member firms have produced material on the financial reporting implications of Coronavirus. The following is a selection: Deloitte’s ‘Need to know — Accounting considerations related to coronavirus disease 2019’ (20 March 2020) highlights some of the key issues to be considered by entities in preparing their financial statements applying IFRS Standards for periods ending on or after 31 December 2019. EY’s ‘Responding to Covid-19’ resource centre includes material looking at IFRS accounting considerations of the COVID-19 outbreak (24 March 2020), with links to two publications, ‘Applying IFRS – IFRS accounting considerations of the Coronavirus outbreak – February 2020’ (which highlights considerations when preparing IFRS financial statements for the year ended 31 December 2019), and ‘Applying IFRS – Accounting considerations of the coronavirus outbreak – Updated March 2020 (highlighting accounting considerations for the financial effects of the coronavirus outbreak when preparing IFRS financial statements for annual or interim reporting periods ending in 2020). KPMG’s Resource centre on the financial reporting impacts of coronavirus includes FAQs on potentially significant accounting and disclosure implications for companies. This resource centre focuses on the potential financial reporting impacts for 2020 period ends. PWC’s ‘Accounting implications of the effects of coronavirus: PwC In depth’ (26 March 2020) considers the impact on financial statements for periods ending after 31 December 2019 of entities whose business is affected by the virus. Their ‘Accounting implications of coronavirus: PwC In brief’ (12 February 2020) looks at the accounting implications of the coronavirus for December 2019 year ends in the context of IAS 10, ‘Events after the reporting period’. Other related information The FCA, FRC and PRA have announced a series of actions (26 March 2020) to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets. ESMA, the EU’s securities markets regulator, has issued a Public Statement (27 March 2020) on the implications of the COVID-19 pandemic on the deadlines for publishing financial reports which apply to listed issuers under the Transparency Directive. ESMA has issued a public statement (25 March 2020) on the financial reporting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9 Financial Instruments. ESMA is issuing this statement in order to promote consistent application of IFRS in the European Union and avoid divergence in practice on the application of IFRS 9 in the specific context of the COVID-19 outbreak. The European Banking Authority (EBA) has also issued a related Statement (25 March 2020) regarding the prudential framework and accounting implications of COVID-19. This page was last updated on: 27 March 2020