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Financial reporting challenges during COVID-19

Management, with the oversight of those charged with governance, is responsible for the preparation of the financial statements. As the uncertainty in the future economic outlook continues, management faces ongoing challenges in the preparation of the financial statements such as increases in estimation uncertainty.

Some financial reporting areas to consider include:

  • Management’s assessment of whether the going concern assumption is appropriate and takes into account the most recent forecasts and expectations of future business activities, including disclosures about substantial doubt or when a material uncertainty exists.
  • Alternative methods, significant assumptions or sources of data used by management in assessing the effect of estimation uncertainty as part of developing estimates and analyzing impairment of intangible assets.
  • Impact of contract modifications such as amendments to the terms of debt agreements, waivers on debt covenants, or rent concessions.
  • Fair value measurements, particularly of financial instruments and investment property to determine that the value reflects the conditions at the date of the financial statements.
  • Financial assistance received (or planning to receive) from government stimulus programs and the appropriate accounting treatment, for example whether the financial assistance needs to be spent on a particular activity like payroll.

The below resources provide additional guidance related to financial reporting and challenges finance teams may face due to the impact of COVID-19.