CHIEF financial officers (CFOs) need to be cognisant of what has happened and is happening when preparing their respective financial statements and approving them for issue, says Grant Thornton Malaysia PLT.
Its country managing partner Datuk NK Jasani said CFOs also need to be aware of what is likely to happen next, as the impact of the Covid-19 pandemic continues to unfold around the world.
“Malaysian Financial Reporting Standards (MFRS) requires that all the material effects of Covid-19 are appropriately recognised, measured and disclosed at the entity’s reporting date; be it interim or at year-end.
“Entities should consider many aspects to ensure that those financial statements not yet issued are presented fairly,” he said in a statement today.
Following the impact of the Covid-10, the leading audit, tax and advisory firm has outlined some key questions and answers for CFOs to consider.
Among them is the consideration to disclose information in the management commentary note to the financial statements on understanding the coronavirus and its impact on their business.
CFOs may also want to think if the outbreak would result in more disclosures.
“The answer to this question is almost certainly yes. In many situations, the outbreak will result in revised obligations or uncertainties that an entity may not have previously recognised or disclosed in its financial statements.
“The additional disclosures will not only relate to the revenues, expenses, assets and liabilities they have already recognised, but also what might end up recognised in subsequent reporting periods,” he said.
Ultimately, Jasani said, it will be how they have coped with the outbreak so far. Their focus should be on disclosing in their financial statements what steps have been taken to contain and minimise the impact of this global event on their operations.
Almost every entity with a Dec 31, 2019 reporting date is likely to conclude that this outbreak is a non-adjusting event – but that does not absolve it from fully disclosing the post-reporting date consequences on the organisation and its future operations and activities.
“However, if your entity has a later reporting date, say March 31, 2020, then adjustments to the carrying amounts included in your financial statements will almost certainly be required if the entity is in a position to quantify then.
“If not, then this should be disclosed as well because the objective of preparing any set of financial statements should be to provide readers with insight not only on the entity’s past activity, but also its current operating situation and its future viability,” he added. — April 6, 2020, Bernama
