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Corporate reporting during a pandemic

By David Hackett, Technical Manager, Association of International Certified Professional Accountants

Considering the global pandemic, professionals involved in corporate reporting are pausing to consider the impact of coronavirus on their business. Leaders who fully comprehend their business model and have a robust risk mitigation plan are best positioned to report on the financial and non-financial position of the company. They may find benefits to their bottom line.  

Assess material impact.

A first step in reporting on the entirety of a business is to assess the material impact. By using a robust business model framework, organisations can identify material concerns. Material concerns include supply chain management, as borders close and international trade becomes more difficultThe health or well-being of the wider workforce, including subcontractors and consultants, may be another issue 

It is critical to look at material impact beyond initial cashflow. It may be tempting to raise prices in the short term to offset losses, but don’t risk reducing customer retention in the long-term.  

Adjust to circumstances. 

Consider changes to reporting disclosures, including asset impairment assumptions and fair value of assets. 

Also consider reporting on a going concern basis. You may decide to report on a going concern basis due to new travel bans, community restrictions, government assistance, financial health of key suppliers and customers, existing financial resources, government support measures, and the likely timescale of all these factors.  

Even if the impact of COVID-19 is not considered material, reporting requirements may demand organisations state on what basis this decision is made. The general climate of uncertainty has also focused investor attention on to liquidity and ongoing viability. This should be considered when developing company narrative.  

Leaders must stay current with changes to financial reporting requirements per governmental regulations. Examples include the the moratorium on preliminary results until 5 April in the UK, and the recently published European Securities and Markets Authority guidance on the disapplication of IFRS 9. This has never occurred before. Businesses must be agile in responding to these measures. 

Report beyond financial statements  

Even if COVID-19’s impact is not considered material, companies should prepare to state why business operations and reporting decisions were madeIncreasingly, investors are looking at other elements of reporting and focus attention on liquidity and ongoing viability. 

Strategic reports are an opportunity for directors to communicate how the board is taking account of its new challenges. The entities that adhere to the international integrated reporting framework or other international frameworks such as the GRI are well positioned to consider and report on potential impacts to their businesses.  

Every challenge presents an opportunity. Implementing clear processes and procedures during a crisis and reporting business operations clearly to staff and stakeholders will better prepare your company for any  economic difficulty.