Have you started preparing your upcoming financial statements?

Auditors will be ensuring that year-end financial reporting accounts for the impacts of COVID-19, so now’s the time to check you’ve got it covered. To make it easier for you, we’ve summarised some key areas below that should be considered when preparing your next financial statements.

‘Subsequent event’ disclosure of how COVID-19 will impact your organisation

A subsequent event is something that occurs after a reporting period, but before the financial statements for that period have been issued. Information should be disclosed about the impacts of COVID-19 in your financial statements — the detail of such disclosure will depend on the extent to which your business has been affected.

 

Can ‘going concern’ be justified for the next 12 months after issuing the financial statements?

Going concern refers to the assumption that your business will continue to operate into the foreseeable future. It’s important that your budgets/cash flow forecasts have taken into account the effects of COVID-19 in order to carry out a robust going concern assessment.

 

Impairment of assessments

The diminishing in quality or value of any of the following assets should be taken into consideration:

  • Goodwill and intangibles
  • Property, plant and equipment
  • Inventory
  • Receivables e.g a provision for doubtful debts

An impairment loss reduces the profit your business reports for the period, but has no immediate impact on the cash balance.

 

The value of your land/buildings

If your land/buildings are revalued annually by an independent valuer, your valuer should have taken into account the impacts of COVID-19. Ensure this assessment corresponds to your financial statements.

 

Statement of Service Performance

If you prepare a Statement of Service Performance, consider disclosing how your Outcomes and Outputs have been impacted by the COVID-19 lockdown and economic downturn.

 

For-profit considerations

If you’re a for-profit, consider potential early termination of contracts by customers, modification of contracts or changes in variable transaction prices under IFRS 15 Revenue from Contracts with Customers. You should also consider lease modifications as a result of lease payment deferral and/or government assistance under IFRS 16 Leases.

 

The disruptions of COVID-19 means that there are more things to take into account in your upcoming financial statements. If you need assistance with preparing for the statements for your business, then please don’t hesitate to reach out to the Kendons team on info@kendons.co.nz. We’re always happy to help.

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