What is the impact of the COVID-19 crisis (if any) on companies’ financial statements? Should it be recorded on the Financial Statements of 2019 (that are going to be prepared and approved in the first half of 2020) or only in the 2020? What is the impact on the evaluation of a company’s assets, liabilities, inventories, etc.?
Financial statements are regularly and periodically disclosed by companies to provide financial information useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the company itself (for example, investing buying its stocks). Moreover, financial statements should provide a “true and fair” view of the company’s financial position, cash flows and financial performance. Financial statements are prepared following accounting rules and standards.
Assistant Professor Francesco Venuti, and his co-authors Associate Professor Gladie Man Ching Lui and Associate Professor Paul Pronobis, in the paper “Accounting implications of the COVID-19 outbreak”, provides an overview of the major challenges CFOs face in the light of the current COVID-19 crisis when preparing their financial statements. In particular, CFOs need to consider the magnitude of disruption caused by the outbreak to their business operations and adequately disclose the information about those assets and liabilities that are subject to significant estimation uncertainty. Furthermore, the question arises whether the outbreak represents an event before or after the end of the recent reporting period (Financial Year 2019) which needs to be discussed in the (current) financial statements of 2019. Also, CFOs need to revisit the accounting for fair value estimates, expected credit losses (ECLs), impairments, and other assets. Finally, the CFOs should carefully assess whether these events or conditions may compromise the company’s ability to continue as a going concern (i.e. to continue its business activity).
This paper is part of the first series of impact papers produced by the school’s faculty on “Managing a Post-Covid19 Era”.
The ESCP Impact Papers are meant to help business and society following this unprecedented pandemic and are aimed at providing insights into management knowledge that is applicable to not only practising managers, but also other stakeholders, namely the European community, students and society.
If you would like to find out more, please click here to our latest impact paper discussing the topic above in more depth.
First impact papers meant to help business and society following this unprecedented pandemic
Pramuan Bunkanwanicha, Régis Coeurderoy and Sonia Ben Slimane introduce the very first series of impact papers produced by the school’s faculty on “Managing a Post-Covid19 Era”.
Two sides of the same coin: Why entrepreneurs can transform the crisis into business opportunities to create more impactful and long-lasting ventures
Professor Francesco Rattalino and Assistant Professor Alysa Sydow, authors of “Two-sides of the same coin: why entrepreneurs can transform the crisis into business opportunities to create more impactful and longlasting ventures”, explain why entrepreneurs can transform the COVID-19 crisis into business opportunities for long-lasting ventures.
Freedom & vulnerability: How people develop new skills in an unexpected work environment
Associate Professor Chiara Succi, in the paper “Freedom & vulnerability: How people develop new skills in an unexpected work environment”, in particular focuses on the set of soft skills developed by people to face the many challenges on a personal, social and methodological level.