Financial Reporting Issues To Consider As A Consequence Of COVID-19

Falling Short: Excel and Financial Reporting Problems | Centage

For many UK businesses, the COVID-19 crisis was devastating. Lockdown measures meant business closures and new social distancing guidelines and the requirement of face masks and other protective gear is making it difficult for many businesses to interact with their customers, let alone stay open long enough to do so.

Fortunately, this should only be a temporary setback for these businesses and operations should be back to normal again very soon. But, with that being said, there are some other important factors that UK businesses need to consider if they are to remain sustainable in our post COVID-19 world. I am talking about COVID related transactions such as loans, grants, and how these will affect profits and business growth. There are some issues that we will need to prioritise: going concern and liquidity, impairment assessment, financial reporting, and government assistance and tax.

Let’s take a look at how COVID related transactions are going to affect the profits and business growth of UK businesses:

Government Assistance And Income Tax- the response by the UK government to the COVID-19 crisis was to introduce economic stimulus packages for consumers as well as support measures for individual industries. Some of these measures include direct subsidies, tax exemptions, tax reductions and credits, extended expiry period of unused tax losses, reduction of public levies, rental reductions or deferrals and low-interest loans. These relief measures fall within the scope of the standards on income tax, on government grants, on leases or financial instruments and the accounting may be different in each case.

Financial Reporting- the Financial Reporting Council, the body responsible for the oversight of corporate reporting in the UK, has recently written UK companies alerting them to the fact that they need to ‘make appropriate meaningful disclosures in their annual reports relating to the disclosure of principal risks and uncertainties affecting a company’s business model.’

Going Concern And Liquidity- does your business have enough cash to survive the next 6 to 12 months? When preparing financial statements, accountants have to assess whether or not a company has the ability to continue as a going concern, and if that is an accurate assessment. The key will be in the cash flow.

Impairment Assessment- at the end of every reporting period, businesses are required to assess whether there is any impairment of their nonfinancial assets.

Contact Fortuous

To learn more about how COVID related transactions are going to affect the profits and business growth of UK businesses, contact Fortuous today and speak with an experienced London accountant who can answer any questions you might have. Be sure to click this link to Get An Instant Quote today!

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