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COVID-19 and the relevant going concern considerations

COVID-19 and the relevant going concern considerations

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Ágnes Rakó

Partner

KPMG Tanácsadó Kft.

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The impacts of the COVID-19 coronavirus outbreak have caused a significant deterioration in economic conditions for some companies and an increase in economic uncertainty for others. Management needs to assess whether these events or conditions, either individually or collectively, cast significant doubt on the company’s ability to continue as a going concern or, in severe cases, whether the going concern assumption is still appropriate as a basis for the preparation of the company’s financial statements.

In assessing whether the going concern assumption is appropriate, management assesses all available information about the future, considering the possible outcomes of events and changes in conditions, and the realistically possible responses to such events and conditions that are available.

Actions for management:

  • Identify risk factors and the different possible outcomes, downside scenarios and update of forecasts and sensitivities.
  • Review projected covenant compliance in different scenarios
  • Assess its plans to mitigate events or conditions that may cast significant doubt on the company’s ability to continue as a going concern (availability of finance, plans are achievable and realistic or not).

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