Not all listed companies are entirely clear regarding the effects of the coronavirus pandemic in their semi-annual financial reporting. This is the conclusion of a review by the Dutch Authority for the Financial Markets (AFM). Nearly all the companies reviewed report on the effects of the pandemic, but the quality of this reporting varies widely and needs to improve in certain respects.
- Identifying points that need improvement in the 2020 annual reporting
- A quarter of the companies present good information on the consequences of the coronavirus pandemic
- Good disclosure of all relevant aspects is needed
- Good reporting is important for investors
- AFM shares examples of good practice
Identifying points that need improvement in the 2020 annual reporting
In its review titled ‘In Balance – The effects of COVID-19’, the AFM assesses the quality of the disclosures provided by companies on the effects of the pandemic in their semi-annual reporting. The report also lists the areas that need improvement in the 2020 annual reporting. The AFM’s review involved 26 listed companies that could be expected to experience negative effects from the pandemic.
A quarter of the companies present good information on the consequences of the coronavirus pandemic
Approximately one quarter of the companies reviewed present a good disclosure. Here, the AFM sees a detailed disclosure of financial covenants, sensitivity analyses and scenarios in addition to a qualitative and a qualitative disclosure of their assumptions and starting points. These companies also devote attention to consistency between the semi-annual management report and the semi-annual financial statements in order to present a complete picture.
Good disclosure of all relevant aspects is needed
Around half of the companies reviewed provide good disclosure on some but not all the relevant aspects. The AFM urges them to remedy this in their 2020 annual reporting. They need to include adequate and comprehensible disclosure of their assumptions and starting points for items such as deferred tax assets, provisions for credit losses and impairment tests. There is also a small group that provided hardly any disclosure.
Good reporting is important for investors
For investors, it is important that listed companies report relevant information on the effects of the pandemic in their financial reporting. This concerns not only the financial effects, but also non-financial aspects related to these developments, such as the outlook for employees and the company’s business model. It is also important that companies report clearly on the measures they are taking to mitigate the negative effects of the crisis.
The AFM shares examples of good practice
The AFM urges companies to use care in the preparation of their disclosures of the effects of the coronavirus pandemic in their 2020 annual reporting and ensure that these are comprehensible. The AFM cites a number of examples of good practice in its report.
Journalists may contact Daniëlle de Jong, AFM Press Officer, at +31 (0)20 797 2129 or firstname.lastname@example.org.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.