Article Post on 25 March 2020

ESMA and the EBA Issue Guidance on Accounting Implications of COVID-19

_On 25 March, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) issued public statements on accounting implications of the economic support and relief measures adopted by EU Member States in response to the COVID-19 outbreak.

ESMAs statement focuses on financial reporting aspects for EU issuers, whereas the EBA statement is concerned more with the application of the prudential framework within the EU banking sector, both in relation to the application of IFRS9 in light of COVID-19 measures.

Both bodies are supportive of the measures taken and proposed by national governments and EU bodies to address the adverse systemic economic impact of the COVID-19 pandemic that include general moratoria, payment holidays stemming from public measures or industry-wide payment relief initiatives taken by credit institutions.

The principles-based nature of IFRS 9 includes flexibility to reflect the circumstances of the COVID-19 outbreak and the associated public policy. However, issuers and their auditors will need to carefully consider the accounting treatment given to the application of these measures.

Issuers should discuss these developments with their auditors immediately, and consider their transparency obligations as regards the disclosure of any relevant significant information concerning the impacts of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation.

_If you are in any doubt as to your legal or regulatory obligations at this time, then you should take specific legal advice. Our Investment Funds and Banking & Finance Practice Groups will be happy to assist with any queries relating to regulatory obligations in the wake of the market shock caused by the COVID-19 pandemic and any resulting regulatory change.

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