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Last updated: 14 Oct 2021
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IFPR - the impact of the new regime on accounts and audit

As we continue to guide FCA regulated firms through the preparation of IFPR ahead of implementation in January 2022, here, we pay a particular focus to the impact the new regime will have on your financial statements and audit.
Strategic report

As a regulated firm, you will have been working on preparing for the changes in multiple areas including capital requirements, liquidity requirements, regulatory reporting, Pillar II assessments, governance and risk (find our key points for effective and efficient preparation here). When planning for these changes, you will also need to consider the impact on your financial statements and audit.

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Katherine White

+44 (0)20 7556 1374
whitek@buzzacott.co.uk
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As a regulated firm, you will have been working on preparing for the changes in multiple areas including capital requirements, liquidity requirements, regulatory reporting, Pillar II assessments, governance and risk (find our key points for effective and efficient preparation here). When planning for these changes, you will also need to consider the impact on your financial statements and audit.

Strategic report

MiFID investment firms that are limited companies must prepare a directors’ report and strategic report. The new regime will impact on these reports including:

  • The strategic report should include a fair review of the company’s business, and a description of the principal risks and uncertainties facing the company. This may include mention of how IFPR will affect the company.
  • The strategic report should include a description of the company’s strategy and business model and therefore the changes required by IFPR may affect this. 

If your firm is a Limited Liability Partnership, the directors’ report and strategic report requirements do not apply, but you may wish to consider adding similar information to your Members’ Report.

Subsequent events disclosure

Subsequent events disclosure

Major events after the end of the reporting period are required to be disclosed in your financial statements. This could therefore include those that occur as a result of IFPR such as major restructuring, issues of equity instruments or other increases in the firm’s capital.

Going concern

Going concern

Your auditor is required to review your ‘going concern assessment’. In assessing whether the going concern assumption is appropriate, the firm’s management must take into account all the available information about the foreseeable future, which is at least, but is not limited to, twelve months from the date when the financial statements are authorised for issue. 

IFPR will then feed into this assessment: for example, increases in capital requirements will have to be anticipated and cash flow forecasts and budgets prepared to show how you will maintain sufficient capital in the firm. In addition, you will need to consider the longer-term impact (if any) of other factors including COVID-19 and Brexit.

Ideally, your forecast should consider the ‘base case’ and the sensitivity of the base case to movements in the key assumptions such as variations in revenue or expenses, considering plausible ‘best case’ and ‘realistic worst case’ scenarios.

Although there is no written requirement for you to prepare a formal going concern document for your audit, the auditing standard on going concern (ISA (UK) 570 (Revised September 2019) Going Concern), states “Where management has not yet performed an assessment of the entity's ability to continue as a going concern, the auditor shall request management to make its assessment”. We therefore recommend that you document your assessment prior to your audit commencing.

Find the latest on IFPR, and how it will impact your firm here:

IFPR - are you ready?

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