Young finance market analyst in eyeglasses working at sunny office on laptop while sitting at wooden table.Businessman analyze document in his hands.Graphs and diagramm on notebook screen.Blurred.

Accounting Implications of COVID-19

Morris Maroon ||

The Covid-19 outbreak was declared a pandemic by the World Health Organisation (WHO) on 11 March 2020. The situation in Australia is rapidly evolving and potential effects of the Covid-19 are difficult to predict.

In this article, we take a brief look at some of the accounting and reporting effects of Covid-19 on Australian businesses.

Implications on Financial Reports

Is the Coronavirus an adjusting or non-adjusting event?

An adjusting event is defined as an event that provides evidence of conditions that existed at the reporting date. A non-adjusting event indicates conditions that arose after the reporting date (AASB 110).

For the reporting period ending 31 December 2019, the Coronavirus is a non-adjusting event, as at that time, only a small number of cases had been reported to the WHO of an unknown virus and there was no explicit evidence of human-to-human transmission. The subsequent spread of the virus and responses to the outbreak arose after the reporting period and therefore no adjustments need to be made to amounts recognised in the 31 December 2019 financial statements.

Going concern

The AASB 110 requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate. This applies even if those events would otherwise be categorised as non-adjusting events.

Entities should consider whether the events may, individually or collectively, cast significant doubt on the entity’s ability to continue as a going concern and whether the going concern assumption is still an appropriate basis for the preparation of the entity’s financial statements.

If the going concern assumption is not appropriate, the financial statements as at 31 December 2019 would need to be adjusted.

Disclosure

Entities should consider whether the non-adjusting events related to the Coronavirus arising after the reporting date may be material, and thus require disclosure. Entities should consider disclosing the impact of developments after the reporting date on the carrying amount of assets and liabilities or the impact on revenue or borrowing covenants.

Other

Other areas that may be impacted by the Coronavirus include:

  • Impairment of non-current assets and goodwill;
  • Onerous contract provisions;
  • Net realisable value of inventory;
  • Expected credit losses;
  • Deferred tax assets;
  • Cash flow hedge accounting; and,
  • Significant judgement and estimates disclosures.

If you require assistance with reporting effects or any of the above mentioned areas, please do not hesitate to get in touch with a lawyer in Coleman Greig’s Litigation & Dispute Resolution team, who would be more than happy to assist.

Share:

Send an enquiry

Any personal information you provide is collected pursuant to our Privacy Policy.

Categories
Archives
Author

More posts

Festive season: Managing public holiday work obligations

Employers are gearing up for a run of public holidays. Provisions requiring an employee to work on a public holiday in certain circumstances have been commonplace and not overly concerning. However, the Federal Court recently held that such a provision contravened the National Employment Standards.

Employers should exercise caution when dismissing during probationary period

Can you dismiss an employee during the probationary period? Yes, but a recent case is a lesson in caution. The recent Federal Court decision of ‘Dabboussy v Australian Federation of Islamic Councils’ is a warning to employers to consider the importance of timing if dismissing an employee during probation.

The business impacts from the Government’s new cyber security laws

Cybercrime ‘is a multibillion-dollar industry that threatens the wellbeing and security of every Australian’. In an effort to combat the impact on businesses and individuals, the Australian Government has introduced cyber security legislative reforms into the Parliament.

A guide to intrafamily adoption

Adoption is the process where a parent’s legal rights for their child are transferred to another person. The formal adoption of a stepchild or close relative is known as intrafamily adoption.

Passenger movement and visa data-matching by the ATO

Heading overseas for work or a holiday? Taxation issues, including tax residency, should be on front of mind when departing from or arriving to Australia. Why? Because the Australian Taxation Office (ATO) can follow your footprints and, if you’re not careful, spring unexpected taxes on you.

Is it really necessary for my executor to have so many powers?

People often question why the executor of their estate needs to have so many powers. Simply put – if your executor isn’t given any additional powers by your Will, then they are limited to what is set out in the Trustee Act. One area that this can lead to issues in, is the family home – particularly if beneficiaries aren’t in agreement.

Essential terms of a commercial lease

A commercial lease is a contract that details the rights and obligations of a tenant and landlord. So, what are the necessary terms of a commercial lease?

Responding to data breaches

In the final part of our four-part series on your business’ responsibilities related to cyber attacks and data breaches, Special Counsel John Bennett how businesses should respond to data breaches, including application and requirements of the Notifiable Data Breaches Scheme.

© 2024 Coleman Greig Lawyers  |  Sitemap  |  Liability limited by a scheme approved under Professional Standards Legislation. ABN 73 125 176 230