As I post this article, Brexit is less than three weeks away, although by the time you read this (even if you’re reading it fairly promptly) that may no longer be true, overtaken by a postponement, or by Britain choosing instead to sink into the sea…

From my point of view, the only discernible virtue of Brexit is in making me even more glad than I already was to be living here in Canada. For sure, as I write this, Canada is consumed by its own political scandal, and I severely wish I weren’t living on the same continent as Trump (whose malign influence is increasingly detectible in our own domestic politics). Still, as contemporary frustrations go, that’s easier to take than Britain’s self-destructive recklessness. I would suggest that those who recklessly promoted Brexit prior to the referendum (let alone those who still do) are among the greater moral criminals of our time, although I suppose the relative mixture of self-serving malignity and dim-witted blunder may vary from one perpetrator to the next. In their different ways, Brexit and Trump both embody the same toxicity: an inability to collectively engage with escalating complexity and challenge, manifested by collapsing back into an unrealistic (indeed, entirely phantasmagoric) view of the past. As practitioners whose “brand,” as people like to call it, depends in large part on doing exactly the opposite, on finding a way to represent present complexities in a way that allows informed forward-looking decision-making, I believe accountants should set themselves in constant principled opposition to such monstrosities. Of course, I realize the profession as a whole will find this an overly ideological stance.

I only got around the other day to looking through the ICAEW’s Brexit-related materials, and I have to say I was surprised and impressed that there were so many of them (and again, grateful that I didn’t need to know earlier).  This includes the following summary of the Financial Reporting Council’s expectations for Brexit-related disclosures: 

• the specific and direct challenges to the business model and operations rather than broader economic uncertainties;
• particular threats, such as changes in import or export taxes or supply chain delays, which are to be clearly identified;
• actions taken or being taken to mitigate or manage the potential impact, which may in some circumstances mean recognising or re-measuring certain items in the balance sheet; 
• sensitivity analyses to help users understand the sensitivity of assets and liabilities to changes in management’s assumptions, and possibly a wider than usual range of reasonably possible outcomes regarding cash flow projections which should be disclosed and explained.

This all makes perfect sense of course. I looked for a while through recent Canadian filings for such financial statement disclosures relating to Brexit, without finding very many. It was easier to find disclosures from outside the financial statements, but even then, many of the more notable examples were from US entities that file in Canada. Here’s one such disclosure from Rayonier Advanced Materials:

• The Company does not currently operate any manufacturing facilities, have any significant sales to customers, or have any major supply chain relationships, in Great Britain. As such, with respect to the exit of Great Britain from the European Union (“EU”), whether under a negotiated agreement with the EU or pursuant to a “hard” exit absent such an agreement, the Company does not expect Brexit to have a material impact on its business, financial condition or results of operations. However, the Company does have manufacturing facilities in the EU (in France) and in 2018 had $360 million of sales to customers in the EU, so to the extent that Brexit impacts the EU’s economy generally, specific regions of the EU or specific companies located in the EU, no assurances can be given that such events would not have a material impact on the Company’s business, financial condition or results of operations.

This may strike a reader as an “abundance of caution”-driven disclosure, reaching beyond the immediate threat to point out the possible ripples: still, at least it quantifies the ripples. This example from SNC-Lavalin Group Inc. (a company at the heart of the very Canadian scandal I mentioned, if you’re not paying attention, and not that I would urge you to) is somewhat less specific:

• On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union (E.U.), commonly referred to as “Brexit”. Brexit could result in increased geopolitical and economic risks, currency exchange fluctuations, and could cause disruptions to and create uncertainty surrounding our businesses, including affecting our relationships with existing and future customers, suppliers and employees, which could in turn have an adverse effect on our financial results and operations. There could also be greater restrictions on imports and exports between the U.K. and E.U. countries and could also result in increased regulatory complexities. These changes may adversely affect our operations and financial results.

The danger of such generality is that it may be read as essentially saying no more than: “We’re involved in Britain, and that’s probably bad.” But in the circumstances, maybe that’s as eloquent as it needs to get…

The opinions expressed are solely those of the author