COVID 19 has impacted the economy at large.
Business Entities are indulging in mitigating the impact of this world wide pandemic on their operations. Financial Statements also need to account for such eventualities while reporting.
Mention below are few aspects that needs to be assessed while finalising the books of accounts by business entities.
Going Concern Assumption:
Reassess one of the basic fundamental accounting assumption i.e. entities ability to continue as a going concern in foreseeable future.
Due to COVID19 there could be a possibility of increased sales return, decrease in volume discounts, higher price discounts etc.
Many financial assertion requires management estimate to account for in books of accounts.
such as Estimated life of fixed assets to account for depreciation, bad debt etc.
All such Management estimates should be reconsider giving effect of COVID-19
Deferred Tax Assets (DTA):
Prior to creation of DTA entities should assess that this is probable that there will be taxable profits in future against which temporary differences will be adjusted.
There might be cases of writing down of inventory to NRV due to ongoing disruption in supply chain.
Fixed assets to be tested for impairment on the basis of ability of asset to generate cash flow in future.
Due to the ongoing plant lockdown and lack of maintenance and servicing of equipment, the estimated life of a physical asset needs to be reassessed.
Impairment of investment should also be considered to give effect to sharp fall in current market prices of various securities listed in market and others also.
Management estimates also change due to COVID-19.
What is the Impact on Employees Benefit that employees is geting full Benefit or less.