KUALA LUMPUR: Companies need to consider accounting or disclosure implications resulting from the Covid-19 pandemic and the current market conditions, according to EY Accounting Link report.
Many travel, hospitality, retail and entertainment companies have experienced a decline in revenues and in some instances been forced to close temporarily.
“The effects on businesses have been pervasive, and it is uncertain how long the effects will persist and how widespread the effects will be.
“Further, the uncertainty and related factors have resulted in significant volatility in the financial markets,” it said adding, that based on the report, the affected Securities and Exchange Commission (SEC) registrants may need to make additional disclosures.
Affected companies it said, should disclose any unusual or infrequent events, transactions or any significant economic changes that materially affected income from continuing operations (such as lost revenue or costs attributable to the event related to the Covid-19 pandemic).
Companies are also required to disclose known trends or uncertainties that have had or are reasonably expected to have, a material effect on the registrant’s revenue or income from continuing operations, liquidity or capital resources.
“A company that is having liquidity issues should evaluate the adequacy of its disclosures related to potential capital needs and alternative sources of capital to fund those needs,” it said.
Besides that, the report said business disruptions may indicate a change in circumstances that could result in asset impairments or require a change in accounting estimates.
“We expect that accounts affected by estimation processes will need close evaluation on an interim basis.
“Depending on the business and industry, some of these estimation processes may be based on data that is highly subjective or likely to dramatically change in the future,” it added.
In addition, companies would need to conduct a robust and thoughtful evaluation process to make sure they have appropriate internal controls in place to adequately identify and evaluate known facts and circumstances when developing their estimates, the report said.
Source : https://www.theborneopost.com/2020/04/03/consider-accounting-impact-from-covid-19/