Potential effects of the Coronavirus outbreak on financial reporting

06 May 2020

Implications for 31 December 2019 Year Ends

A number of businesses have reduced or suspended operations and have instructed employees to stay at home.

This brings potentially significant financial reporting implications, in particular considerations concerning impairment and going concern. This IFRB focusses on implications for periods ended 31 December 2019, but will be relevant for other reporting dates. There will also be implications for interim reports issued in 2020.

Read more about the potential effects COVID-19 has on 31 December 2019 year end financial reporting.


Implications for Year Ends beginning on or after 31 January 2020

For reporting periods beginning on or after 31 January 2020, the effects of the coronavirus would need to be incorporated into the preparation of financial statements. The effects of the coronavirus may be very wide spread, and relate to many industries; they are not limited only to entities operating directly in the travel and tourism industry (e.g. airlines, tour operators, etc.). Coronavirus may affect entities in nearly every sector, due to the following impacts:

  • Reduced consumer demand for goods and services due to lost income and/or restrictions on consumers’ ability to move freely;
  • Lack of investment in capital improvements and construction reducing demand for many goods and services;
  • Reduction in market prices for commodities and financial assets, including equity and debt instruments; and
  • Disruption of global supplies chains due to restrictions placed on the movement of people and goods.

Read more about the potential effects COVID-19 has on 2020 reporting peroids and onward.


Impairment Implications of Covid-19

IAS 36 Impairment of Assets applies to many of an entity’s non-financial assets, such as goodwill; intangible assets; property, plant and equipment; right-of-use assets; equity accounted investees and investment properties measured on the cost model.

Due to the adverse economic impact of COVID-19, many entities will have impairment indicators present at reporting date and thus will need to perform impairment tests on their assets.

Impairment tests may prove difficult to perform due to the level of uncertainty created by the effects of COVID-19.

Read more about the impairment implications of COVID-19


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