On this basis it is expected that forecasts

  • No School
  • AA 1
  • 5

This preview shows page 2 - 4 out of 5 pages.

On this basis, it is expected that forecasts, projections and associated assumptions used for the purposes of impairment testing would reflect either little or no change as a result of the Conoravirus Outbreak. The rationale for this is that, when measuring the recoverable amount of financial and non-financial assets, it is necessary to use projections that are based on reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset. Those reasonable and supportable assumptions are required to be made as at the reporting date 31 December 2019. STATUS Final EFFECTIVE DATE Immediate. ACCOUNTING IMPACT Potential effects on impairment calculations, consideration of going concern, and additional disclosure requirements.
Image of page 2
3 IFRB 2020/02 POTENTIAL EFFECTS OF THE CORONAVIRUS OUTBREAK ON 31 DECEMBER 2019 FINANCIAL REPORTING Consequently forecasts, projections and valuations used for impairment calculations as at 31 December 2019 will need to be reviewed carefully, in order to ensure that the significant effects of the Coronavirus Outbreak (a non-adjusting post balance sheet event) are not being incorporated through the use of hindsight. Linked to this requirement, it will also be necessary to ensure that appropriate disclosures are made of non-adjusting post balance sheet events in financial statements for the period ended 31 December 2019. IAS 10.21 requires that: ‘If non -adjusting events after the reporting period are material, non-disclosure could reasonably be expected to influence decisions that the primary users of financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Accordingly, and entity shall disclose the following for each material category of non- adjusting event after the reporting period: a) The nature of the event; and b) An estimate of its financial effect, or a statement that such an estimate cannot be made.’ Disclosures in 31 December 2019 financial statements that may be necessary as a result of the Coronavirus Outbreak include: Estimates of impairment of financial (expected credit losses) and non-financial assets Breaches of covenants in lending or other arrangements Triggers of conditions which give rise to debt or other instruments being required to be redeemed (or being repayable at the option of the counterparty) Waivers of, or changes to, the contractual terms of lending or other arrangements Supply chain or other trading disruption Dealing with the suspension or termination of contracts, and the assessment of whether a contract for the sale or purchase of goods or services is an onerous contract. GOING CONCERN IAS 10 Events After the Reporting Period contains specific requirements when considering going concern. In contrast to projections used for the purposes of impairment, entities are required to consider events both before and after the reporting date, with IAS 10.15 noting that: ‘Deterioration in operating re sults and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern
Image of page 3
Image of page 4

You've reached the end of your free preview.

Want to read all 5 pages?

  • Fall '19
  • International Financial Reporting Standards

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors