Companies were already in crisis before the pandemic. What will happen now that many workers are layoffs and sales have fallen?
It will affect the work of the accountant and the preparation of financial reports and will become incomplete due to the cessation of activities in all production and commercial sectors, goods and services. Of course, global production will be affected by the epidemic because of the stoppage of many companies that produce raw materials and the stopping of airports and all means of transportation between countries affected by an COVID-19 epidemic.
Differential impacts depending on the sector. Clearly companies in the tourism sector, including airlines and cruise lines, have been shocked by customer demand evaporating almost overnight. That will extend to local tourism operators whose customers are now staying away.
But people still need to buy essentials such as food and sanitary products, so those producers, distributors and retailers may survive OK.
Non-essential purchases which can be deferred may endure a period of hardship then benefit from the subsequent release of pent-up demand.
Hence the differential impacts by sector. The complexity will be further compounded by which companies have the financial balance sheet strength to endure the hard times before the banks come pounding on their doors.
If the risk management profession has been doing its job, companies should have sufficient cash reserves and low debt to endure periods of hardship. On the other hand, companies with low cash reserves and high debt may become insolvent before market demand picks up. That is not necessarily a bad thing because the "fit" companies will then gobble up the market share of the "weak" companies. There may be a period of dislocation in which production cannot meet demand and employees retrain and migrate to new employers, but over time this should resolve itself.
Which then leads us to question the ability and willingness of the banks to help (or liquidate) companies in financial distress due to COVID-19. Generally banks are so thinly capitalised that they cannot afford too much bad debt nor asset write-down before the banks themselves are insolvent, as we saw in the Global Financial Crisis. But the "blessing" of the GFC was that regulators subsequently enforced high capital reserving and stress testing upon the banking sector to ensure banks could withstand this kind of crisis.
That is what I am now watching most closely: will the banks' enhanced reserving pull us through the COVID-19 crisis? Intuitively, I think and hope that while some banks may fail, the sector as a whole will survive much better than we experienced in the GFC. That is important, because if governments have to bail out the banking sector again, there might not be enough borrowing capacity in the bond market which will then require governments to resort to QE/money printing which will risk currency devaluation and inflation thereby causing further economic dislocation (cp Venezeula as a worst case scenario).
Many business will fold up because many of these firms may not able to meet their operational cost, which is very critical for firms survival.
definitely the situation of financial statements after appear this virus will change by charging new expenses and acquiring modern kind of revenue , in addition to adopts new standards and rules in accounting .
As the saying rightly goes '' one's health is one's primary wealth". everything rises and crumbles around health. The health of society is the predictor of the health of the firm. In the midst of this pandemic it is very certain that financial statements will take a new twist. What would one expect in the midst of such? change is the only imperative if businesses are to survive. To comment with direction, it is important to understand that the business environment has different industries. firms will be affected positively or negatively according to the industry they belong to. Since financial statements show the performance, position and profitability of business in a particular period, it is more than certain that this pandemic will affect most businesses in these three aspects.How ever , I must hasten to mention here that, while trade in most house hold goods is brought to a lock down, there is heightened activity in the pharmaceutical industry and other health related firms .Thus, the financial statements of firms in these industries are likely to record some positive changes. Why ? business is about solving problems. profits come from problems solved. to remain relevant in this turbulent economic environment, one must be able to provide solutions to existing problems.@
I believe the impact of this pandemic on the financial statement of companies will vary depending on The sector. As Far as the financial statement of companies are concern, loses are going to be recorded in the tourism industry among others, but not the financial statement of companies in the pharmaceutical industry.
Stoppages in production as well as the delivery of services, the supply chain in general, as a result of the pandemic will adversely affect global production
https://www.google.com/url?sa=t&source=web&rct=j&url=https://ec.europa.eu/economy_finance/publications/pages/publication708_en.pdf&ved=2ahUKEwi8qK_VmLboAhXCQEEAHfNXCYAQFjAAegQIBxAC&usg=AOvVaw0tfU7PzRKwkMwbImEF2nGv
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/646195/EPRS_BRI(2020)646195_EN.pdf&ved=2ahUKEwi8qK_VmLboAhXCQEEAHfNXCYAQFjABegQIBxAI&usg=AOvVaw1FjC4Yngi4E6gRSzED0gBb
This article read in my thought. It was the effect on the market that I decided to describe in my next article. I am sending it to you because it is very interesting:
Article Feverish Stock Price Reactions to the Novel Coronavirus
Due to the distortions in the supply chains where there is shortages of supplies production might be low with the exception of food and medical supplies sector. Therefore, less work will be expected and eventually affect the final preparation of the final statements of businesses.
Well, there are variations from one industry to another and from one economy to another. Government bail outs might ease financial miseries of some industries while other companies might find new opportunities for windfall gains in making ventilators as in the case of GM in USA. Travel and tourism will be the most affected sector and might require sustained stimuli packages to regain confidence. It is obvious that economists might be forced to review current global supply chains and logistics management in view of spillage effects from suppliers to consumers.
I am sending the following article to you because it is very interesting:
https://www.confindustria.it/wcm/connect/93fdba38-d1c2-40b7-aecb-8d063e9362d9/Risultati+relativi+all%27indagine+sugli+effetti+del+Covid-19+per+le+imprese+italiane.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE-93fdba38-d1c2-40b7-aecb-8d063e9362d9-n4nAi-N
COVID 19 per see may not have effect on the 2019 financial year for those companies whose financial year ends on 31st December. however,. there should be a note to accompany the financial statement to inform the shareholders that 2020 financial year will be greatly affected by the pandemic.
Enterprises will never be like before. They will never be able to think like before. Legacy will be set aside. Post Covid firms will look to new markets, new product lines in line with their market expectation; will reskill their manpower and even take fresh manpower; get into organised way of accounting and reporting; more compliance behaviour and so are the related costs abosorption. The fond hope is that the financial sector would realize this paradigm shift and reorient their lending patterns and modify their risk behavior. In the short term there will be commotion in the industry and markets. May be difficult to cope with but no option.
This reserach might be interesting for you Neu, D., Rahaman, A. S., & Everett, J. (2010). Accounting for social purpose alliances: Confronting the HIV/AIDS pandemic in Africa. Contemporary Accounting Research, Forthcoming.
Most firms have solid balance sheets only up to September 2020. December 2020 quarterly figures are yet to come in for many firms. To think of year ending March 2020 is something that will have to wait for the lockdown to lift and see the realization of their creditors.
yes.. This reserach might be interesting for you Neu, D., Rahaman, A. S., & Everett, J. (2010). Accounting for social purpose alliances: Confronting the HIV/AIDS pandemic in Africa
Nations that have provided relief for the cash losses and wage losses for SMEs that constitute the vital supply chain link will gain competitive edge over other economies like India which took only the credit guarantee route for rescue.
No doubt that the pandemic hit corporations badly. However, the hit impact is different from an industry to another and from a corporation to another. Meanwhile, a few corporations took advantage of this and somewhat benefited. I think the following paper will enrich your knowledge in this regard.
Corporate immunity to the COVID-19 pandemic
W Ding, R Levine, C Lin, W Xie - 2020 - nber.org
Many businesses operating in sectors where sales revenue has decreased due to the SARS-CoV-2 (Covid-19) coronavirus pandemic, will report either financial losses or small gains in 2020 reports. The scale of the losses will be correlated with many factors. Among others, with the following factors:
1. The scale of correlation between the development of the SARS-CoV-2 (Covid-19) coronavirus pandemic and the consumption of specific types of products and services by citizens.
2. Possibilities of developing sales for citizens of particular types of products and services via the Internet.
3. The scope of time and the level of rigors for the introduced lockdown of the economy, i.e. the legally required temporary closure of shopping centers, service plants, restaurants, hotels, cinemas, museums, city parks, schools, kindergartens, offices, etc.
4. Scale of citizens' compliance with state-established anti-pandemic and sanitary safety instruments (eg wearing face masks, home quarantine, restrictions on the movement of citizens in public places, etc.).
5. Information policy shaped by public institutions and central states dealing with the sphere of public safety and health, and information on the SARS-CoV-2 (Covid-19) coronavirus pandemic disseminated socially through citizens on social media portals.
6. The level of financial support for enterprises operating commercially by the state, from the state's public finance system, in order to maintain their continuity of operation during the pandemic, despite the real decline in the scale of economic activity (as part of the interventionist socio-economic policy and the so-called Anti-Crisis Shields).
7. The period of the SARS-CoV-2 (Covid-19) coronavirus pandemic, the scale of the pandemic development rate, the number of new coronavirus infections and deaths caused by severe Covid-19 disease. Best wishes,
Dariusz Prokopowicz
