With only a few new and amended standards coming into effect this year, it might be tempting to think that the 2022/23 reporting season will be straightforward. However, increasing levels of uncertainty and the combination of high interest rates and rising inflation, alongside an ongoing climate emergency, will all need careful consideration when preparing the annual report and accounts. 

As UK inflation hits its highest rate for 40 years, companies must assess the impact of this on their financial statements. It may affect several financial reporting areas, including the discount rates used to reflect the time value of money, forecasting, and impairment reviews. 

Going concern assessments are likely to become more judgemental. For some businesses not prepared for high levels of inflation, the effect may cast doubt on their long-term viability and going concern status.

Preparers should also bear in mind that in times of uncertainty, reporting risks in the ‘front-half’ of the accounts may gain increased attention. Users will want to understand the entity’s resilience to current threats and challenges, including those arising from high energy prices, rising interest rates and political uncertainty. Any changes to the principal risks of the business will need to be clearly communicated.

“Economic uncertainty and volatility present significant challenges for preparers of accounts, who must keep in mind the fundamental principle that the financial statements should reflect conditions that existed at the balance sheet date,” says Kate Beeston, Technical Manager in ICAEW’s Financial Reporting Faculty. “As the impact of uncertainty is so far reaching, there are many areas of reporting that may require more attention than in previous years.”

The consideration of climate-related matters only adds to the challenges faced by preparers. All businesses, regardless of size, need to assess the impact of climate on the financial statements. 

Certain in-scope entities will also be complying with the UK government’s new Climate-related Financial Disclosure Regulations for the first time. These entities will be required to disclose detailed information on climate-related matters in the front-half of their accounts.

The Financial Reporting Faculty has issued a guide, Planning for the 2022/23 reporting season, which looks at the specific challenges within the current reporting season and where you might focus your efforts. It also touches on UK regulator expectations, highlighting key improvement points identified by the Financial Reporting Council (FRC) in its Annual Review of Corporate Reporting 2021/22.

The new guide is available to all ICAEW members and Financial Reporting Faculty subscribers and includes links to a number of additional resources that may be useful for the upcoming reporting season.

Read in full: Planning for the 2022/23 reporting season.