The novel COVID-19 Pandemic, with its resultant economic impacts, has engendered the need to have detailed financial information more than ever by investors and stakeholders. The decisions by governments in many countries to curtail the spread of the Coronavirus has had major impacts on the global economy. As a result, many businesses had to stop operations or adopt the approach of virtual working which has resulted in the following among others:
- Dwindling revenue and cash flows;
- Shutdown of production facilities;
- Postponement of planned investment decisions;
- Disruptions in supply chain;
- Reduction in manpower;
- Inability to raise finance;
- Volatility in financial markets;
- Increase in price of essentials and consumables.
Consequently, a number of accounting and financial impacts based on the requirements of the International Financial Reporting Standards (IFRS), will need to be considered in addressing and disclosing the financial effects of COVID-19 when preparing financial statements.
In this Article, we have discussed the possible areas of impact of the Pandemic with respect to accounting and financial reporting and we have provided our comments.
Basis of Preparation of Financial Statements
As a general principle of accounting, financial statements of entities are prepared based on the assumption that the entities are going to be in business for a foreseeable future.
This is otherwise known as Going Concern assumption. The term, foreseeable future, will generally be regarded as at least, but not limited to, 12 months from the end of the reporting period. This could also be at least the first 12 months after the balance sheet date, or after the date the financial statements will be signed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.