The outbreak of COVID-19 and the impact on the wider economy is placing unprecedented pressures on communities and businesses. Near term business priorities and focus will be on liquidity and potential going concern issues. However, attention also needs to be paid to the value of balance sheet assets and the requirement to consider if these are impaired.

This is a question regardless of industry sector but particular attention should be paid to those entities that have large property, plant and equipment (PP&E) balances or material goodwill and/or intangible assets. Assessments made about the fair value of such assets a few months ago may no longer be valid. At the very least, they will need to be reconsidered in light of the COVID-19 pandemic and the potential impact this will have on all businesses. Similarly, the oil price war requires consideration of the same types of factors for companies operating in the oil and gas sector.

Accounting standards are prescriptive in how to conduct an impairment review, but in the current environment, there are a number of significant challenges in applying these rules. For more information, please download the information note below.