Name: The Impact of covid-19 on iAS 36
Uploaded: 2022-05-27
Duration: 6 min 3 s
Description: abstract image. COMPILED BY : KIMERA SINGH STUDENT NUMBER: ST10108550.

Cypress Pointe Lane 16. abstract image. COMPILED BY : KIMERA SINGH STUDENT NUMBER: ST10108550. 

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COMPILED BY : KIMERA SINGH STUDENT NUMBER: ST10108550

Cypress Pointe Lane 17. Cypress Pointe Lane 15. group of people at a conference table. 

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Scope of IAS 36 Impact of COVID-19 has on the economy The impact of COVID-19 on IAS 36: Impact of COVID-19 on the economy Accounting impact of COVID-19 WHEN THE IMPAIRMENT IMPLICATIONS OF COVID-19 SHOULD BE RECOGNISED WHEN TO TEST FOR IMPAIRMENT LEVEL AT WHICH THE IMPAIRMENT TEST IS PERFORMED AND GROUPING OF ASSETS RECOVERABLE AMOUNT: FAIR VALUE LESS COSTS OF DISPOSAL (FVLCOD) RECOVERABLE AMOUNT: VALUE IN USE (VIU)

Cypress Pointe Lane 17. Scope of IFRS 36. 3. IAS 36 covers a wide range of assets in a company's financial statements, whereas IFRS 9 focuses on financial assets. As a reminder, the guidelines apply to the following:. 

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IAS 36 covers a wide range of assets in a company's financial statements, whereas IFRS 9 focuses on financial assets. As a reminder, the guidelines apply to the following:

IAS 36,  Impairment of Assets  IFRS 9,  Financial Instruments    Goodwill;    Intangible assets;    Property, plant and equipment;    Right-of-use assets;    Associates and joint ventures accounted for under the equity method;    Investment properties not measured at fair value; and    Costs to obtain or fulfil a contract recognised in accordance with IFRS 15, after the impairment requirements of IFRS 15.101-103 have been applied.  Financial assets classified at amortised cost and debt instruments classified at fair value through OCI, which will commonly include many types of loans and debt instruments;

Cypress Pointe Lane 18. Impact of COVID-19 on the economy. 

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Coronavirus Infection ('coronavirus') epidemic, also known as 'COVID-19,' is a severe public health concern. It has disrupted global movement of people and things, and various levels of government have imposed restrictions on individuals and corporations as a result. The impact on financial reporting as a result will be severe.

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Cypress Pointe Lane 19. Accounting impact of COVID-19. 

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COVID-19's impacts may necessitate impairment testing because numerous entities will have indicators of impairment.  Due to the level of ambiguity caused by COVID-19's effects, impairment tests may be difficult to complete.

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Cypress Pointe Lane 20. IAS 36 – WHEN THE IMPAIRMENT IMPLICATIONS OF COVID-19 SHOULD BE RECOGNISED. 

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IAS 36 – WHEN THE IMPAIRMENT IMPLICATIONS OF COVID-19 SHOULD BE RECOGNISED

As of December 31, 2019, COVID-19's impacts are a 'non-adjusting' subsequent event. When the World Health Organization designated coronavirus a global health emergency on January 30, 2020, significant government action and intervention began. This often triggers the identification of the outbreak's broad economic effects in financial statements. However, the deadline of 30 January 2020 should not be viewed as a 'law' for when entities should start recognizing the outbreak's consequences. For example, a manufacturer with a 31 December 2019 year-end that imports significant amounts of inventory from the Wuhan region of China may have experienced disruption due to the outbreak prior to 30 January 2020 (because there were significant effects in late 2019), and this uncertainty would have been factored into the entity's application of various accounting policies, including impairment, as of the 31 December 2019 year-end. This is because, based on information available as of December 31, 2019, one of the reasonably probable scenarios included severe COVID-19 consequences. It is difficult to cut off information that is relevant as at a particular end of a period due to outbreak constantly changing. Therefore, it is appropriate to evaluate whether the various scenarios utilized for IAS 36 purposes at each reporting date include reasonable and supportable assumptions about the range of economic conditions that are expected to prevail in the future at that time.

Cypress Pointe Lane 21. WHEN TO TEST FOR IMPAIRMENT. 

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Many of the indicators of impairment, such as losses in quoted asset values, supply chain operational disruptions, and revenue and profitability decreases, may exist as a result of COVID-19's consequences. Therefore, entities will have to calculate impairment. IFRS 36 requires intangible assets to be tested for impairment when there are indicators of impairment. After the effects of COVID-19 have started to fade, entities may be necessary to develop impairment estimations. Most impairment costs, save for goodwill, are reversed in later quarters if there are signs that previous impairment has been lessened or eliminated. This could happen if asset values rebound, COVID-19-related ambiguity is resolved, and entities are able to restart operations at pre-COVID-19 levels.

Cypress Pointe Lane 22. LEVEL AT WHICH THE IMPAIRMENT TEST IS PERFORMED AND GROUPING OF ASSETS. 

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LEVEL AT WHICH THE IMPAIRMENT TEST IS PERFORMED AND GROUPING OF ASSETS

Unless the asset generates cash inflows that are significantly independent of those from other assets or groups of assets, assets are assessed for impairment at the individual asset level (e.g. a single item of property, plant, and equipment). In practice, many assets will need to be divided into cash generating units (CGUs) for impairment testing purposes.  COVID-19's effects were apparent shortly after the first year period in which firms reported results using IFRS 16, Leases. As a result of IFRS 16, many leases that were previously accounted for as off balance sheet operating leases are now recognized as right-of-use assets, bringing the scope of IAS 36 much wider (ROU assets).

Cypress Pointe Lane 23. RECOVERABLE AMOUNT: FAIR VALUE LESS COSTS OF DISPOSAL (FVLCOD). 

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RECOVERABLE AMOUNT: FAIR VALUE LESS COSTS OF DISPOSAL (FVLCOD)

Due to the effects of COVID-19 on global asset values, capital availability, and market players' risk tolerances, the price a company would receive at that given point in time could be much lower than prices or estimations of prices it might have received at previous dates.  These drops in value may appear to be a 'distress sale,' necessitating a change in the fair value calculation. Such declines in value, however, would not be related to factors that would be compensated for, except in severe situations. Fair value measurement, which is a current amount as of the period end, results in significant price drops at one point in time.

Measuring Fair Value for Financial Reporting Purposes Thompson Greenspon CPA

Cypress Pointe Lane 24. RECOVERABLE AMOUNT: VALUE IN USE (VIU). 

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As shown in the previous sections, the effects of COVID-19 may have a substantial impact on DCF models utilized; however, certain factors should be addressed in VIU calculations:  The availability of necessary resources to 'ramp up' operations once the entity expects to be able to increase (or resume) operations (e.g. employees, raw materials, etc. );  the demand for the entity's goods and services during and after the outbreak's worst effects (e.g. a medical supply firm vs. a tour operator);  and VIU calculations are based on assets in their current condition. That is to say, future restructurings or asset enhancements that the business has not yet committed to may not be considered. As a result, if a company is planning a major overhaul of its operations in order to redeploy assets as a result of the epidemic, these financial inflows and outflows may not be considered until the entity is fully committed to the restructuring (e.g. the plan has started to be implemented and the main features have been announced to those affected).

Formula to calculate the recoverable amount - IFRS MEANING

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The Impact of covid-19 on iAS 36

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 This Photo  by Unknown Author is licensed under  CC BY-SA-NC

The Impact of covid-19 on iAS 36

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