IFRS news | 27 July 2016
UK referendum on membership of the European Union Financial reporting implications
On 23 June 2016, a referendum in the United Kingdom returned a result in favour of leaving the European Union (commonly referred to as ‘Brexit’) by a margin of 52% to 48%. This was immediately followed by the resignation of David Cameron as Prime Minister, with a successor due to be chosen later in the year.
Whilst the longer term political and economic effects of these events are as yet unclear (Article 50 of the Lisbon Treaty, which results in withdrawal within two years, has not yet been activated and there have to date been no negotiations on Britain’s future relationship with EU member states), the announcement of the referendum result immediately triggered a significant amount of market turbulence, including:
- significant volatility in UK equity markets, particularly in the banking sector.
- sterling falling by 10% against the U.S. dollar and 8% against the Euro.
- downgrade of the UK’s credit rating by major ratings agencies.
The effects of the referendum have also been felt further afield, with significant volatility in, for example, other European, North American and Asian stock markets.
Many entities will be preparing either interim or annual financial reports for the period to 30 June 2016. The on going financial reporting implications of the political situation in the UK will need to be considered when those reports are prepared.
The purpose of this publication is to remind preparers of the main issues that they will need to think about as entities prepare their IFRS financial statements as at 30 June 2016.