Help with financial reports and accounts during the Coronavirus crisis
For some businesses, the Coronavirus will have a significant impact on year-end accounts and potentially the audits. When preparing an entity’s financial statement, the extent to which the uncertainty and/or disruption of the outbreak in January 2020 affects it will vary depending on the year-end.
For year-ends before the outbreak (e.g. 31 December 2019), asset or liability values at the balance sheet date should not be affected. However, additional disclosures are likely to be needed in the notes to the financial statement to describe any subsequent impairment.
For year-ends after the outbreak (e.g. 31 March 2020), the value of assets and/or liabilities at the balance sheet date might well be affected.
Which assets should be considered
For year-ends after the outbreak, those charged with governance should consider whether their usual year-end processes are sufficient to accurately assess the value of assets, given the potential greater uncertainty. Asset values to be considered include:
- Intangible assets
- Investment assets, such as property and shareholdings in other entities (whether listed or not)
- Trade debtors
- Contracts in progress at the year-end, including loss-making ones
- Share schemes for employees – the grant date value may be affected depending on when the share scheme was entered into.
Stock and going concern
For stock, there is the practical point of whether the stock can actually be counted at the year-end given government guidance on movement of people and social distancing. This might also affect auditors’ ability to attend stock counts and perform their checks. Businesses will need to agree with their auditors a process to meet auditing standards while adhering to the government’s guidance.
Regarding the impact on going concern (which considers the 12 months from the date the accounts are approved), forecasts will need to be re-run with different assumptions on profitability and funding. It may be necessary to add additional disclosures in the directors’ or strategic report and notes to the financial statements.
Harnessing technology as a solution
Some businesses are already turning to technology during this period of social distancing, for example, taking a video on a smart phone to assist with stock take procedures. Technology is also being employed to make accounting and auditing more efficient and to model future projections. With the right support, potentially difficult problems can be managed, resolved or even avoided entirely, so it is worth investigating what’s available.
For further guidance, we’re here to help.