The rapid outbreak of the coronavirus (COVID-19) presents an alarming health crisis that the world is grappling with. The outbreak has been declared as a pandemic by the World Health Organisation (WHO) and a notified disaster by the Government of India. Measures to combat the pandemic have resulted in significant disruptions in business operations coupled with trade restrictions and non-fulfilment of contractual obligations. These are expected to cause consequential deterioration in economic conditions for some companies and an increase in economic uncertainty for others across almost all sectors. Together, these may have unusual accounting, audit and reporting implications for the companies for the financial year ended 31 March 2020. In this edition of Accounting and Auditing Update (AAU), we cast our lens on some of the key accounting and financial reporting impacts of the outbreak to be considered by companies in India.
The COVID-19 outbreak is also expected to create a number of potential challenges for companies to conduct, and auditors to attend inventory counts. Possible situations that could arise due to the outbreak could include - management does not conduct an inventory count on the balance sheet date or physical inventory count conducted at a date other than the date of financial statements. Also, there could be a situation where it is impracticable for an auditor to attend the physical inventory count. Through our article on the topic, we aim to discuss the key considerations while performing and observing inventory count in some of the possible situations.
Indian Accounting Standard (Ind AS) 109, Financial Instruments, Ind AS 32, Financial Instruments: Presentation and Ind AS 107, Financial Instruments: Disclosures have introduced several new accounting concepts as well as extensive disclosure requirements for companies that apply Ind AS. As Non-Banking Financial Companies (NBFCs) transitioned to the new accounting framework effective 1 April 2018, their annual reports for the year ended 31 March 2019 provided a first-hand opportunity to better understand the transition choices made by the companies in financial services sector, their key accounting policies and the qualitative disclosures as prescribed under relevant Ind AS. In this edition, we have covered an analysis of the disclosures provided by NBFCs in their Ind AS financial statements for the year ended 31 March 2019. The analysis is based on annual reports of 48 NBFCs with debt securities listed on BSE and 33 equity listed NBFCs as on 1 April 2019.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.