The novel coronavirus (COVID-19) is expected to affect most of the companies in India, either directly or indirectly. Implementation of stringent measures to contain or delay the spread of COVID-19 has significantly disrupted business operations and economic activity. The unpredictability of the potential impact of the outbreak may result in material uncertainties that cast significant doubt on the entity’s ability to operate as a going concern. Accordingly, it becomes imperative to understand and anticipate the effects of COVID -19 on businesses while performing an assessment of going concern this year. In this edition of Accounting and Auditing Update (AAU), we aim to discuss some of the key aspects pertaining to going concern assessment.
Due to COVID 19, certain sectors may face financial distress, such as declining demand, falling sales and margin pressures and could be more exposed than others. Other areas of impact may include assets becoming obsolete, volatility in asset pricing and currency exchange rates, inability to raise finance and failure to meet contractual obligations. These may pose significant financial reporting implications for the companies such as necessary impairment assessment even for assets tested for impairment annually, change in timing of revenue recognition, impact on credit risk and resultant change in measurement of credit losses and most importantly assessment of going concern assumption. Through our article on the topic, we aim to highlight relevant financial reporting considerations for companies operating in various sectors amid COVID-19.
In order to prevent the economic shocks becoming more severe and to ensure continuity of viable businesses during current times, recently, the Reserve Bank of India (RBI) has issued an array of economic measures in the form of various regulatory and developmental policies. These measures are aimed to mitigate the burden of debt servicing brought about by the disruption on account of COVID-19 and improve the functioning of the capital markets. Our article on the topic provides an overview of the measures introduced by RBI to be considered by companies while evaluating the impact of COVID-19 on their businesses.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.