The Corona crisis raises technical questions about accounting and reporting in accordance with the German Commercial Code (HGB) and the International Financial Reporting Standards (IFRS). Do the current effects have to be considered in the accounting as of December 31, 2019, but also in all other still open financial statements as of reporting dates prior to December 31, 2019? And if so, how? Meaning: How does the Corona crisis affect the annual financial statement and management report?
Here you will find the most important questions and our answers for your orientation.
Are depreciations or provisions already required?
In the case of the Corona crisis, there is an event that creates value and has no impact on the annual financial statements. Even though the first corona cases became known as early as December 2019, the worldwide spread of the virus did not occur until after 31 December.
Depreciations and provisions would be necessary if the Corona crisis and the associated subsequent events, such as exit and travel restrictions, store and gym closures, were to be value-enhancing events. This is not the case.
Is the corona crisis an adjusting event within the meaning of IAS 10?
The same principles apply as for accounting under commercial law. The worldwide spread of the coronavirus must therefore be regarded as an event that does not require consideration, i.e. as a non-adjusting event. For this reason, it does not necessarily affect the accounting in the IFRS financial statements as of December 31, 2019.
Can you continue to report under the going concern assumption?
This depends on the extent to which the reporting company is affected by the current effects of the pandemic.
If the crisis threatens the existence of the reporting company, it may not be possible to maintain the accounting principle of going concern. In this case, the assets and liabilities must be stated at their respective current market values, which may mean the recognition of depreciation and provisions. This must be examined on a case-by-case basis.
Should information on the corona crisis be included in the notes and the management report?
In our opinion, this is a value-determining event that has no impact on the balance sheet or profit and loss statement. Nevertheless, in most cases it is an “event of special significance” within the meaning of the German Commercial Code (HGB). Companies should address this in the supplementary report in the notes and in the management report, namely the risk and forecast reporting.
In the event of a significant non-adjusting event, IFRS requires that the nature of the event is reported and an estimate of the financial impact is made. If an estimate is not possible, this should also be disclosed in the notes.
The corona crisis affects companies in very different ways. The effects vary depending on the industry and the size of the company. The scope of the required reporting and whether the going concern principle can be maintained depends on the individual case.
Our expert Thilo Marenbach and his team is available for an individual examination at any time.