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COVID-19: Impairment Considerations

COVID-19: Impairment Considerations

Accounting standards are prescriptive in how to conduct an impairment review, but at present, there are significant challenges in applying these rules. This article discusses these challenges and the next steps to take.

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Caroline Bott

Partner, Valuations

KPMG in the UK

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COVID-19: Impairment Considerations

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.

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.

In our article "COVID-19: Impairment Considerations" we discuss these challenges and the suggested next steps to take.

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