The CNMV publishes its monitoring priorities for the 2020 annual accounts

In early February, the Spanish Securities and Exchange Commission (“CNMV”) published a report describing its monitoring activities for issuing entities’ audited annual accounts for financial year 2019; and specifying its priority areas for monitoring the 2020 annual accounts.

In line with the European Securities and Markets Authority (“ESMA”) guidelines, the CNMV’s monitoring of listed companies’ annual accounts for 2020 will focus on:

Financial information

• Transparent application of estimates and standards to record the impact of COVID-19 on financial statements.
• The responsibility of the entities’ governing bodies and the importance of the Audit Board’s monitoring, given the complexity of the current context.
• A breakdown of the potential impact of Brexit on the issuing entities’ activities and financial information.

Of the issuing entities’ 2019 annual accounts submitted to the CNMV: (i) 65% did not refer to the effects of the COVID-19 crisis, since the accounts were prepared before the pandemic; (ii) 32% included the effects of COVID-19 as events subsequent to year-end (and most accounts only reported qualitative information because it was difficult to estimate COVID-19’s impact given the early stage of the pandemic and the degree of uncertainty); and (iii) only 3% included impact projections.

Non-financial information

• Transparent reporting of the consequences of the pandemic regarding non-financial aspects.
• Corporate and employment-related aspects, particularly regarding inclusion, diversity and health and safety, as well as infrastructure resilience and the ability to prevent and manage cyber-attacks.
• Risks related to climate change, focusing on (i) the measures adopted to prevent and mitigate its impact; and (ii) potential opportunities. To that end, issuing entities should consider different time horizons in order to reflect the uncertainty in the short, medium and long term.

Both ESMA and CNMV encourage issuing entities to carefully explain their approaches to these aspects, the preventive measures implemented and the outcomes of these measures.

The CNMV has also decided to include in the 2020 monitoring plan a more detailed analysis of non-financial aspects with a dual focus. On the one hand, examining how non-financial aspects affect the entity’s situation and results and on the other, how the entity affects the various interest groups.