The magnitude of disruption from the Covid-19 pandemic has significantly impacted organizations of all sizes, across all industry sectors. Management and those charged with governance (TCWG) are having to make difficult decisions daily about operational, financial, and strategic matters.
The consequences on financial statement reporting and audit engagements are complex. There is an unprecedented level of uncertainty about the economy, future earnings and many other inputs that represent fundamental elements of financial reporting. There will be multiple financial reporting implications to be considered by preparers of financial statements for the purposes of reporting in the short and potentially medium term.
The responsibility for preparing and overseeing financial reporting is with management, with oversight from TCWG. They will have to exercise significant judgment in the current business environment. Of particular importance is:
- Balancing the timeliness of reporting against the reliability and integrity of reported information that appropriately incorporates managements best judgments and estimates.
- Appropriately assessing going concern and disclosures of substantial doubt/ material uncertainty when it exists.
- Providing a fair view and presentation of the performance and position of the entity, which is likely to require comprehensive disclosure of forward-looking information and cash flow impacts.
- Maintaining an environment of integrity and transparency as the basis for trustworthy and ethical decision-making across the organization
- Ensuring effective internal controls over financial reporting and emerging risks and taking advantage of extended reporting deadlines, as needed.
This web page covers many of the key financial reporting challenges and implications from Covid-19 and highlights various resources which are available on the dedicated IFAC Covid-19 website. References and quotes are given from numerous international standards. Not all aspects of those international standards are discussed – as such, readers should refer to those international standards for all the requirements. There may be differences in approach depending on whether financial statements are prepared using IFRS or national GAAP.
Professional accountants must remain focused on their ethical responsibilities and on the public interest. It is important for them to exercise heightened diligence and professional judgment to combat higher risks of financial misrepresentation and fraud, and to ensure government and other assistance is used appropriately. The application of the IESBA International Code of Ethics for Professional Accountants (including International Independence Standards), including compliance with the fundamental principles (integrity, objectivity, professional competence and due care, confidentiality and professional behavior) is key to preservation and expansion of public trust in all professional accountants .
Professional accountants will be asked to produce, analyze, and deliver the information upon which critical decisions will be made. The Code requires that in preparing or presenting information, professional accountants do so in a manner that is intended neither to mislead nor to influence contractual or regulatory outcomes inappropriately. The Code also requires professional accountants to exercise professional judgment to represent the facts accurately and completely in all material respects; describe clearly the true nature of business transactions or activities; and classify and record information in a timely and proper manner.
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This webpage will continue to evolve. Readers are invited to share experiences on areas covered, additional challenges and other resources which they have found particularly helpful.
The following general resources may be helpful (please note that all resources are listed alphabetically by author and reflect no order of relative importance):
- Accountancy Europe Coronavirus Crisis: Implications on Reporting and Auditing
- AICPA Consequences of COVID-19 - Financial reporting considerations
- AICPA Illustrative public company disclosures
- Australian Securities & Investment Commission (ASIC) COVID-19 implications for financial reporting and audit: Frequently asked questions (FAQs)
- Deloitte IFRS in Focus- Accounting considerations related to the coronavirus 2019 Disease
- Deloitte Accounting and financial reporting considerations for audit committees regarding covid-19
- Deloitte Financial Reporting Considerations Related to Covid-19 and an Economic Downturn
- EY Applying IFRS - IFRS Accounting Considerations of the Coronavirus outbreak
- Grant Thornton Reporting the impact of COVID-19
- IESBA Covid 19: Ethics and Independence Considerations
- IFRS Foundation Covid-19 website
- IOSCO Statement on Importance of Disclosure about COVID-19
- IPSASB Covid-19 Relevant IPSASB Accounting Guidance
- KPMG COVID-19 Financial Reporting
- Moss Adams COVID-19 Disrupts Financial Reporting
- PWC Accounting implications of the effects of coronavirus
- PWC Covid-19 Audit Committee financial reporting guidebook
- RSM COVID-19: IFRS Financial Reporting Implications
Professional accountants may also be interested in the dedicated IFAC Covid-19 audit considerations web page.