IFRS: FINANCIAL REPORTING IMPLICATIONS

IFRS: Financial Reporting Implications

 April 28, 2020    By     In News    No Comments

IS YOUR BUSINESS PREPARED FOR THE ACCOUNTING AND FINANCIAL REPORTING IMPACTS OF THE COVID-19 PANDEMIC?

Broad finance and accounting implications for most companies, whether or not operating in a significantly affected region or not.

IFRS IMPLICATIONS – REMEASUREMENT OF ASSETS AND LIABILITIES

Impairment considerations

  • Financial assets – Expected credit losses on receivables, fair value losses on other financial instruments due to significant market uncertainty
  • Non-financial assets – decrease in economic use of property, plant and equipment, negative revaluation of investment property, overvalued investment in associates and joint ventures, carrying amount of inventories greater than net realisable value and uncertainty regarding recoverability of deferred tax assets

Change in contractual terms and conditions

  • Lease modifications as a result of renegotiated lease terms – payment holidays vs deferred of rental income
  • Revenue recognition relating to variable consideration due to uncertainty

Non-Financial Obligations

  • Contingent assets – insurance for loss of income
  • Onerous contracts in which the entity is unable to fulfil obligations
  • Provisions for restructuring

Disclosures

  • Ability to continue operating as a going concern
  • Adjusting vs non-adjusting events
  • Current vs non-current classifications
  • Financial risk exposure
  • Interim vs annual reporting requirements

Financial Implications

Change in expected income and expenses resulting in reassessment of budgets and forecasts

Restructuring cash flow management

Renegotiating debtor and creditor terms to alleviate pressure on working capital

Breach of covenants due to loss of income

  • Assess company’s individual facts and circumstances surrounding the pandemic to determine extent of impact
  • Map out IFRS impact per line item on financial statements and assist with processing of necessary accounting adjustments
  • Assist with adjusting budgets and forecasts for the financial effect of the virus on the business
  • Pre-empt and prepare additional disclosures required for interim and annual financial reporting in accordance with IFRS and Companies Act
  • Assist with interim resourcing to carry on day to day operations and let you focus on other pertinent strategic business objectives

Authors: Nasreen Khan, Associate Senior Manager