The Implications of COVID-19 on Business Financial Reports
The COVID-19 pandemic has touched almost every aspect of life. From our personal lives to our businesses and everything in between, society has had to make very significant changes over the last several months. Unfortunately, many businesses have been negatively affected by the COVID-10 pandemic and the measures taken to slow the spread.
Business operations, cashflow, sales forecasts, financial results, and various other business aspects have all been significantly impacted. This has left many businesses wondering how they will complete their financial reports this year and how they will make plans and predictions for the year to come.
Timely and Meaningful Disclosure
One of the most important aspects of business financial reports is transparency. While many things today are incredibly unpredictable, being honest and transparent in your reporting remains critical. Reliable and consistent reporting will help establish trust in your business during these difficult times.
Accurately disclosing your organization’s financial position, viability, and the measures you have taken to manage risks are all a crucial part of the communication between your business and its stakeholders.
Liquidity and Cashflow Concerns
A major concern for many organizations currently is cashflow. We are at a time where many businesses are struggling or seeing a significant downturn in business. When preparing financial reports, management will need to assess the company’s ability to continue operating despite a significant slowdown in business. Liquidity is a large part of this. Identifying how much cash the organization has along with your liquidity position can help your business recognize opportunities to improve and protect your position.
The unpredictability of the situation can make it difficult to accurately determine the likelihood of a company’s ability to continue operating, Certain assumptions (taking into account potential uncertainties in terms of sales volumes, prices, margins, etc.) may need to be made. These assumptions should be disclosed in your reporting.
It may be helpful to base forecasts on external sources such as economic projections by respected central banks due to the high degree of uncertainty in today’s world.
An asset is considered impaired when the business cannot recover its carrying value, either by selling it or using it. Travel restrictions, health and safety closures, and many other factors can lead to assets being impaired during the pandemic. Businesses must determine the recoverable amounts in these assets, but this can be very difficult to do during these times. Things can change very quickly and that can make accurate forecasts very tough. Engaging valuation experts to assist can be a significant help.
The Affect of Government Assistance on Income Taxes
Depending on an organization’s location and its industry, there may have been government support available at various stages of the pandemic. These measures could include subsidies, tax credits, tax exemptions, rent deferrals, low-interest loans, and various other measures.
Many of these measures will have a significant affect on an organization’s income tax filing. Determining the extent of the impact and how to account for any government subsidies is critical. Experienced tax experts can help your business accurately file income taxes.
How We Can Help
This is a turbulent time for most, and it is especially difficult for many businesses. The team of exceptionally skilled professional Chartered Professional Accountants (CPAs) and financial advisors at Ralevic & Ralevic LLP can help. Our team specializes in providing accounting services, business valuations, audits, financial statement reviews, financial advisory services, tax preparation services, and more.
We can help your business get through these difficult times by preparing accurate financial reports, analyzing the market and your organization’s financial position, and helping your business recognize and take advantage of opportunities. For more information, please contact us.