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The outbreak of Covid-19 has caused a significant deterioration in economic conditions for some companies and an increase in economic uncertainty for others. It is expected that this pandemic will significantly affect extant social behaviors, spending patterns, travel habits, supply-chains, countryinterdependence, and service delivery models, with a consequential impact on lifestyles, markets and the global economy. 

Many companies are facing low demand for their products or services. As a result, there is a likelihood that a triggering event to test impairment has occurred in 2020. As the companies approach their interim financial reporting deadlines, there is an urgent need to evaluate the impact of the outbreak on their accounting and financial reporting.

Entities may need to assess whether the impact of Covid-19 has led to asset impairment. Their financial performance, including estimates of future cash flows and earnings, may be significantly affected, directly or indirectly, by recent and ongoing events. Estimating the fair value, discount rate, estimation of cash flows and computation of value in use requires significant informed judgement in the best of times. The Covid-19 pandemic calls for enhanced consideration of individual facts and circumstances with a rapidly changing macroeconomic overlay.

This document highlights some of the key considerations in relation to the calculation of impairment provision on non-financial assets.

How can KPMG Lower Gulf assist?

Estimating impairment provision requires significant informed judgement in the best of times. The current environment requires enhanced consideration of individual facts and circumstances with a rapidly changing macroeconomic overlay. We would be happy to discuss with you and share our views and experience to help you navigate these complex circumstances.