Accounting considerations in the current environment Accounting considerations in the current environment

Since March 2020, COVID-19 has had a significant impact on our lives. Despite our gradual return to some kind of normality, the effects of COVID-19 on state and private countermeasures are not over yet. Companies are affected in very different ways which can lead to different accounting issues.

Compared to last year, many companies are recovering or have already recovered from the negative impacts of COVID-19. Therefore, disclosures and discussions around topics such as going concern, asset impairments, recoverability of deferred tax assets and measurement of inventories have become less frequent.

While the situation has improved for many companies, some are still severely impacted (e.g. in industries like travel and leisure). Hence, these companies still need to consider carefully whether additional accounting implications (such as further impairments or extended going concern disclosures) are required.

Quite the contrary. The recovery results in new questions and accounting issues that should be considered. For example:

• Is there any indication that a previously recognized impairment loss may have decreased or no longer exists?
• Are expected credit loss assumptions (e.g. provision matrices) updated to reflect changed conditions?
• Are there any changes to budgets which might lead to a reassessment of deferred tax assets?
• Are dividends from subsidiaries planned?
• Is it necessary to adjust expectations regarding satisfaction of service and non-market performance conditions?
• Are estimates of variable consideration (e.g. rebates, refunds, price concessions, performance bonuses, penalties) still appropriate?
• Are there any changes to stand-alone selling prices?

Let us take the first question as an example. Under IFRS and Swiss GAAP FER, companies need to assess at each reporting date whether there is an indication that a previously recognized impairment loss has reversed. If there is such an indication, the recoverable amount must be determined, and the impairment loss is reversed where appropriate. The increased carrying amount of an asset attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of depreciation/amortization) had no impairment loss been recognized in previous years. In addition, impairment losses for goodwill cannot be reversed in a subsequent period.

Our updated talkbook for accounting under IFRS, Swiss GAAP FER and Swiss CO helps identify areas that need special attention, and the accompanying frequently asked questions provide insights into the above-mentioned issues.