ESMA Calls on Companies to Make Full Coronavirus Impact Disclosure

The EU watchdog, ESMA, today publishes a Public Statement addressing the impact of the coronavirus pandemic on the half-yearly financial reports of listed issuers.

May 20 2020 | AtoZ Markets – Listed companies in the European Union (EU) should state the uncertainties they face due to the coronavirus pandemic in their half-yearly reports and explain why they can stay in business, the bloc’s securities watchdog said on Wednesday.

ESMA needs European companies to come clean on coronavirus impact

The European Securities and Markets Authority (ESMA) said that to provide relevant and reliable information, companies may need to use the extra time allowed by national law to publish half-year results.

“ESMA also highlights the importance of providing information on the identification of the principal risks and uncertainties to which issuers are exposed,” ESMA stated.

According to the watchdog, financial firms should disclose the assumptions and judgments used to calculate how much they set aside in provisions to cover expected losses on loans.

The half-yearly updates from companies should be particularly extensive. The reason is that the events related to the COVID-19 outbreak have become evident in the first half of 2020.

Related: ESMA Lowers Reporting Threshold Due to Coronavirus Outbreak

What informaton should the half-yearly financial report contain?

EU companies should also spell out conditions attached to any relief measures they have accepted from governments and regulators during the pandemic, it said.

“ESMA will collect data on how EU listed entities have applied the recommendations and will take into account those findings, amongst other considerations, in setting the enforcement priorities for the annual financial statements for the year 2020.”

ESMA already requires companies to state why they believe they can stay in business for the coming 12 months. Currently, economies are sinking into a deep recession with no recovery in sight until 2021.

“In the context of half-yearly financial statements, ESMA expects issuers most significantly impacted by COVID-19, to provide disclosures about the going concern assessment and the related underlying judgments where these are significant,” the watchdog said.

Related: ESMA Recommends Coronavirus Contingency Plan

Half-yearly reports should also include detailed information about the pandemic’s impact on strategy, targets, operations, financial performance. In addition, the report should include cash flows and disruptions to supply chains, ESMA said.

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