• Silvan Loser, Partner |
  • Frank Richter, Director |

On 24 February 2022, Russian troops started invading Ukraine. In response, multiple jurisdictions have imposed economic sanctions on Russia and Belarus. In addition, a growing number of public and private companies have announced voluntary actions to curtail business activities with Russia and Belarus.

The following sections provide answers for some of the key accounting questions under IFRS, Swiss GAAP FER (FER) and Swiss CO (CO). 

Are the implications of the war and the related events adjusting or non-adjusting events?

IFRS, FER, CO: For the reporting date 31 December 2021, the financial statement impacts of the events and market conditions arising from the war will generally be non-adjusting events (with the exception of going concern, see below). This is because the significant adverse changes in economic conditions and the political/business environment developed as a direct consequence of events occurring after the reporting date. Although certain events did occur prior to 31 December 2021 (in particular, the fact that Russian troops were mobilized around the Ukrainian border and certain sanctions had previously been imposed), the invasion of Ukraine was a specific, defined event which occurred on 24 February 2022 and the significant sanctions imposed by the international community were a direct response to that invasion.

What disclosures might be required?

IFRS, FER, CO: As the impacts of the war in Ukraine and related events are generally considered to be non-adjusting events, they do not affect amounts recognized as of 31 December 2021. If the (potential) financial impacts in 2022 and beyond are material, entities are required to provide appropriate disclosures that reflect the nature of these events or changes in conditions after the reporting date, including an estimate of their financial effect if that can be determined, or a statement that such an estimate cannot be made. 

For example, the following non-adjusting subsequent events may warrant disclosure in the 31 December 2021 financial statements:

  • Impacts on personnel and related support initiatives;
  • Significant business interruption;
  • Impairments of financial and non-financial assets;
  • Volatility/abnormally large changes in equity or debt security prices, commodity prices, foreign currency exchange rates, and/or interest rates after 31 December 2021; and
  • Announcing plans of discontinuance or major asset disposals.

Relevant information may include respective carrying amounts, size of the local operations (e.g., number of employees, proportion of group’s total revenue/profit) and dependence of the entity on the respective operations/relationships.

Is it possible to use hindsight when preparing the 2021 financial statements?

IFRS, FER, CO: No, the use of hindsight is generally not permitted. The financial statements should be based on the information that was reasonably available as of the reporting date. As such, only information that provides evidence of the conditions that existed at the end of the reporting period can be considered.

Does the concept of adjusting vs. non-adjusting event apply for the going concern assumption as well?

IFRS, FER, CO: No. The assessment as to whether the going concern basis is appropriate takes into account events and conditions after the end of the reporting period, i.e. 31 December 2021. Management assesses all available information about the future, considering the possible outcomes of events and changes in conditions and the realistically possible responses that are available to such events and conditions. Those considerations include, among others, the current economic uncertainty and market conditions, which are exacerbated by the consequences of the war in Ukraine.

What are the implications if there is significant doubt on the entity’s ability to continue as a going concern?

IFRS, FER, CO: Specific disclosures must be provided in the entity’s financial statements. The level of detail of disclosures will depend on the entity’s specific facts and circumstances, including the nature and extent of impacts on the entity. In our view, an entity should, at a minimum, disclose the following information:

  • details of events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern and management’s evaluation of their significance in relation to the going concern assessment;
  • management’s plans to mitigate the effects of these events or conditions;
  • significant judgements made by management in their going concern assessment, including their determination of whether there are material uncertainties; and
  • an explicit statement that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and therefore that it may be unable to realize its assets and discharge its liabilities in the normal course of business [IFRS only: not applicable for so called “close call” situations].

What are the implications if the going concern basis of preparation is no longer considered appropriate?

If, after consideration of all available evidence, management concludes that there is no realistic alternative but to liquidate the entity or cease trading, the basis of preparation of the entity’s financial statements must be adjusted and appropriately explained. 

  • IFRS: This requires application of the general measurement, recognition and disclosure requirements, with particular attention paid to the requirements for assets that are being held for sale, the classification of the entity’s debt and equity instruments, impairment testing and recognition and measurement of provisions.
  • FER, CO: This requires use of liquidation values.

More detailed answers and information are available here (Download PDF): Accounting implications of the war in the Ukraine

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