The Coronavirus (COVID-19) has been rightly described as an unprecedented Human, Economic and Financial Crisis facing the world. This pandemic has resulted in widespread economic uncertainty and disruption of businesses. COVID-19 has and will have far reaching implications on financial reporting. These circumstances would potentially present entities with several challenges when preparing their financial statements for year/quarter ended 31 March 2020. In this whitepaper, we have covered some of the key financial reporting implications that companies need to consider and, also, possible approaches that they may consider to dealing with the same keeping in view the business objectives, financial covenants and the accounting standards.
The key aspects impacted by COVID-19 for financial reporting are:
- Relaxations in the time limits for meeting the regulatory compliances
- Impairment of Assets
- Inventory valuations and write downs
- Revenue recognition
- Debt covenants and debt servicing
- Foreign exchange accounting and losses/gains due to extreme volatility
- Litigation resulting from contractual defaults, invocation of force majeure clauses and potential exposure
- Insurance claims for losses during shutdown period or loss of lives
- Going concern
- Extension of Financial Reporting Period
- Presentation issues
Companies shall ensure that they provide sufficient disclosures in the notes to the financial statements with information about the entity that’s useful to existing and potential investors, creditors, lenders, and other stakeholders .
This research paper highlights the existing financial reporting requirements under Indian Accounting Standards(Ind AS) and Companies (Accounting Standards) Rules, 2006 that should be considered when addressing the financial effects of COVID 19 when preparing annual financial statements.