Question

COVID-19, the global health pandemic has however affected every aspect of our existence today without exception. Accounting and financial reporting and those charged with governance now have to address the mitigation of additional financial risks as they relate to the well-being of their businesses.

Discuss three (3) accounting and financial reporting risks and their implications that have been heightened by the current pandemic situation. At least 2 relevant accounting standards (IASs /IFRSs) must be incorporated in your discussion.   

Answer 1

FINANCIAL REPORTING

Financial accounting is the process of collecting,classifying , summarizing and interpreting the financial informations/ transactions related to a business. It is for the preparation of reliable financial statements, which can be beneficial to both shareholders/investors & to the public.

Financial reporting includes; statement of income, balanesheet, statement of cash flows, and statement of stock holder's equity.

ACCOUNTING & FINANCIAL REPORTING RISK

• MEASUREMENT OF INVENTORIES : During the current situation, companies have to value their cost at net realisable value [ NPV ] or even at low of cost. During the pandemic the valuation of inventories become more tough and complex.
• FAIR VALUE MEASUREMENT : For the purpose of measuring fair value, company's usually take in to consideration , the market price approach or valuation method. But the current situation, makes more difficulty to such measurement, and the company's have to taken care over the matters like; assumptions on credit rates, discounts etc.   
• IMPAIRMENT OF NON-FINANCIAL ASSETS : In the usual process of business, every organization has to evaluate whether there is a need to assess the impairment of assets at the end of each accounting year . For the assessment os such impaiement loss, business have to go through with cash flows of future, time value of money and risk associated with assets. But the current pandamic situation make it diificult. Revenues and profitability systems are badly impacted by covid-19, and results in the operations coming to a stand still.
• GOING CONCERN : One of the important accounting standard is going concern concept. It means the life of business never end/ have a long life. Business entities need to assess the covid-19 impact and measures have to be undertaken with regards to it's ability to continue as an going concern.
• BORROWING COSTS : As per the accounting standards, an entity is needed to suspend the capitalization of interest only when the development of an assets get suspended. During the assessment of current situation, entities have to consider all of these factors .