Hi everyone,
With regards to Corona outbreaks, additional disclosures should be inserted in the FS. As, it's a non adjusting events figures will not be amended. Can anyone (specially those who work in audit firms) share sample disclosures (risk, going concern, events after reporting, ecl,...) regarding corona outbreaks.
Thanks
COVID2O19
Re: COVID2O19
yes, it will be interesting to see actual disclosures in travel and leisure sector, personally I haven't done any research
I think it is too general to say that figures (presumably as at 31 Dec 2019) will not be affected, the virus was contracted by humans in Nov 2019. For example, for impairment tests performed as at 31 Dec 2019, I would expect the impact of COVID-19 to be taken into account still in 2019 reports
I think it is too general to say that figures (presumably as at 31 Dec 2019) will not be affected, the virus was contracted by humans in Nov 2019. For example, for impairment tests performed as at 31 Dec 2019, I would expect the impact of COVID-19 to be taken into account still in 2019 reports
Re: COVID2O19
FRC (UK):
The extent of the risk and the degree to which it might crystallise depends on companies’ specific business circumstances. These could
include, for example, extensive operations or manufacturing in China, with consequential staff shortages and production delays. Other entities
might not have a presence in the country but might have significant trading links or global supply chains that are dependent on Chinese manufactured
goods being exported to the UK or elsewhere.
Companies should consider whether to refer to the possible impact of COVID-19 on their business in their reporting of principal risks and
uncertainties. Where mitigating actions can be taken, these should also be reported alongside the description of the risk itself. As well as
possible inclusion within a company’s disclosures of principal risks and uncertainties, the carrying value of assets and liabilities might also be
affected with a need to perform additional impairment tests and to assess whether leases have become onerous. For December year-end
reporters these events would be likely to represent non-adjusting post balance sheet events as at 31 December 2019, given that, at that date,
few cases had been confirmed and the virus only just identified. However, for companies with later reporting dates, year-end balances might
be affected.
Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic
emerges. As a result, companies will need to monitor developments and ensure that they are providing up-to-date and meaningful disclosure
when preparing their year-end reports.
The extent of the risk and the degree to which it might crystallise depends on companies’ specific business circumstances. These could
include, for example, extensive operations or manufacturing in China, with consequential staff shortages and production delays. Other entities
might not have a presence in the country but might have significant trading links or global supply chains that are dependent on Chinese manufactured
goods being exported to the UK or elsewhere.
Companies should consider whether to refer to the possible impact of COVID-19 on their business in their reporting of principal risks and
uncertainties. Where mitigating actions can be taken, these should also be reported alongside the description of the risk itself. As well as
possible inclusion within a company’s disclosures of principal risks and uncertainties, the carrying value of assets and liabilities might also be
affected with a need to perform additional impairment tests and to assess whether leases have become onerous. For December year-end
reporters these events would be likely to represent non-adjusting post balance sheet events as at 31 December 2019, given that, at that date,
few cases had been confirmed and the virus only just identified. However, for companies with later reporting dates, year-end balances might
be affected.
Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic
emerges. As a result, companies will need to monitor developments and ensure that they are providing up-to-date and meaningful disclosure
when preparing their year-end reports.
Re: COVID2O19
thanks! I suppose this will be the standing interpretation, i.e. non-adjusting event as at 31 Dec 2019. But conceptually speaking, I'm not convinced when it comes to e.g. impairment tests based on assumptions as at 31 Dec 2019.The spread of the virus in Jan and Feb only confirmed the severity of the disease that existed as at 31 Dec 2019. But I know this approach would be very inconvenient to both preparers and auditors.
What is your opinion on this?
What is your opinion on this?
Re: COVID2O19
On the original question, no I don't think you can have sample wording because it is going to be very specific to each company's circumstances.
Yes I think that in most cases (for a December year end) it's narrative around risks and future impacts, however not adjusting unless there are supply chains that were affected at the time, eg in China. However all businesses with March year ends will need a robust impairment assessment and supporting narrative as it's hard for any business to say that they are impacted in no way at all. In some cases going concern may be in serious doubt.
Yes I think that in most cases (for a December year end) it's narrative around risks and future impacts, however not adjusting unless there are supply chains that were affected at the time, eg in China. However all businesses with March year ends will need a robust impairment assessment and supporting narrative as it's hard for any business to say that they are impacted in no way at all. In some cases going concern may be in serious doubt.
Re: COVID2O19
I have drafted the below note, which I will include in EVENTS AFTER THE REPORTING PERIOD disclosure. What do you think guys? I believe that we don't have enough information to assess the impact of COVID-19.
"The Coronavirus disease 2019 (“COVID-19”) outbreak has caused extensive disruptions to businesses operation around the globe. On 11 March 2020, COVID-19 was labelled as pandemic by the World Health Organisation. The directors are in the opinion that it is difficult to predict the overall outcome and impact of COVID-19 on the financial statements of the Company at this stage. "
"The Coronavirus disease 2019 (“COVID-19”) outbreak has caused extensive disruptions to businesses operation around the globe. On 11 March 2020, COVID-19 was labelled as pandemic by the World Health Organisation. The directors are in the opinion that it is difficult to predict the overall outcome and impact of COVID-19 on the financial statements of the Company at this stage. "
Re: COVID2O19
well, it doesn't say anything 
is this a public interest entity?
is this a public interest entity?
Re: COVID2O19
I would think it needs some specifics about the potential impacts. Downturn in short term demand? Supply issues? Staff working from home affecting production/client service? Suspension of short term development plans? Comments about the company's policy to protect stakeholders, staff, etc?
Very difficult to comment without any information about the company!
Very difficult to comment without any information about the company!
Re: COVID2O19
I work in a management company where we manage investors fund. Mostly, the principal activity of almost all the Funds, are to generate capital appreciation through long term investments. It's very difficult predict the outcome and impact of COVID-19.
Re: COVID2O19
I'd think you'd want to say the potential impact on the funds, in light of the short term impact, possibly 20-30% down already...
Re: COVID2O19
Ok so the decrease in market value of your investments indeed is a non-adjusting event, but as JRSB said - you are able to assess the impact based on the fair values as at the authorization of financial statements
Re: COVID2O19
PS if you're in EU, see also this statement by ESMA:
https://www.esma.europa.eu/press-news/e ... -19-impact
· Financial Reporting – issuers should provide transparency on the actual and potential impacts of COVID-19, to the extent possible based on both a qualitative and quantitative assessment on their business activities, financial situation and economic performance in their 2019 year-end financial report if these have not yet been finalised or otherwise in their interim financial reporting disclosures
https://www.esma.europa.eu/press-news/e ... -19-impact
· Financial Reporting – issuers should provide transparency on the actual and potential impacts of COVID-19, to the extent possible based on both a qualitative and quantitative assessment on their business activities, financial situation and economic performance in their 2019 year-end financial report if these have not yet been finalised or otherwise in their interim financial reporting disclosures
Re: COVID2O19
Even more detail from accountancy Europe here: https://www.accountancyeurope.eu/public ... -auditing/