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Brexit and its impact on Accounting and Corporate Reporting and the appointment of Auditors - Further Guidance

In February 2019,  we reported on two letters of guidance issued jointly by BEIS ( the UK Department of Business, Energy and Industrial Strategy) and the Financial Reporting Council in preparation for a possible "no deal" Brexit on the subjects respectively of accounting and corporate reporting requirements and of the appointment of auditors.

BEIS has now issued further guidance on these two subjects in publications dated 24th May 2019. Coincidentally, the publication of this further guidance occurred on the date of Mrs May's announcement that she would be resigning as leader of the Conservative and Unionist Party and more importantly as Prime Minister following the elections to the European Parliament, which had taken place the previous day.

It seems clear from these election results that the prospects of a "no deal" Brexit have not receded and indeed  may well have been boosted by the success in the UK of the so-called Brexit Party in those elections.

On an initial review, the latest guidance reinforces the general principles outlined in the earlier two guidance letters - the main difference being that the earlier guidance was geared to  a possible exit date of 11pm (UK time)  29th March 2019, whereas currently the prospective exit date is 11pm (UK time) on 31st October 2019.

The general line in the sand seems to be that for accounting periods beginning on or before "exit date" the existing accounting and corporate reporting requirements will continue to apply whereas  certain exemptions and recognitions applicable throughout the EEA will no longer apply to UK companies with EEA interests and EEA companies with UK interests in respect of accounting periods commencing after "exit date". The cross-border recognition of auditor qualifications will similarly be affected.

It seems likely that, after the brief slow-down prior to the European elections,  preparations for a "no deal" Brexit across many areas ( including accounting and corporate reporting and audit) may need to be stepped up as the 31st October 2019 approaches.