By Huw Jones
LONDON (Reuters) - Britain's listed companies must spell out how Brexit could hit their business and not pad out annual reports with generic concerns, the Financial Reporting Council (FRC) said on Wednesday.
After the failure of construction firm Carillion earlier this year, the FRC is under political pressure to crack the whip on poor reporting. Its powers to bring auditors to heel are being reviewed after lawmakers said its response to Carillion was "timid".
The accounting regulator reviewed 220 company reports for 2017/2018 and found companies taking different approaches to reporting on risks arising from Britain's planned departure from the European Union next March.
Paul George, executive director of corporate governance and reporting at the FRC, said Britain faces challenges with corporate reporting after Brexit.
"Companies should therefore do more to meet the expectations of the market and society in order for the UK to maintain its position as an attractive home for global capital," George said.
Britain and the EU have said they want a divorce settlement and transition deal in place by March, but companies are being urged to have contingency plans in case of a no-deal Brexit.
Companies should distinguish in their next annual report between specific and direct challenges to business models from Brexit, and broader economic uncertainties, the FRC said.
Threats like changes to import and export taxes, or delays to supply chains, should be "clearly identified and for management to describe any actions they are taking, or have taken, to manage the potential impact," the FRC said in an open letter to finance directors and chairs of audit committees.
"In some circumstances this may mean recognising or remeasuring certain items in the balance sheet."
Even after the annual report has been signed off by auditors around December, firms should still disclose any additional information in annual reports when published, the FRC said.
"It will be for companies to decide whether Brexit uncertainties impact their statements on viability and even their ability to continue as a going concern," it added.
It also said it will start looking at whether annual reports in general are still useful given the increased amount of information on companies available from analysts and other sources.
(Reporting by Huw Jones; Editing by David Holmes)