Accelerating and making accounts closing and consolidation more reliable in 2020

Accounts closing and consolidation for the 2020 financial year is fast approaching, and will certainly be impacted by the COVID-19 crisis. The great challenge for CFOs and consolidation managers will be evaluating the economic impact of the crisis on their operations and formulating both individual and consolidated annual accounts in accordance with IFRS and other applicable accounting regulations. This involves revising valuations and making additional estimates. We’ve identified some key examples:

Asset value impairment

Some indicators have forecast lower asset values for the 2020 interim periods.

Tangible fixed assets

• Amortisation of temporarily idle assets.
• Suspension of capitalisation of interest when asset development is interrupted.

Intangible fixed assets with indefinite useful life and goodwill

• In order to assess the impairment here, reflect on any potential variations in expected future cash flows. Use multiple scenarios weighted for profitability.
• When the recoverable value estimate method is based on a fair value, assumptions will be those of market stakeholders.

Investments in associates and joint ventures accounted for in accordance with the equity method

• For those that fall within the scope of IFRS 9, use the relevant impairment guide.

Property investments valued at a fair price

Evaluate the impact of a drop in occupancy rates on valuations and impairments.

Reviewing inventory values

Potential decrease in net realisable values.

Financial assets

Review estimates of incurred losses and provisions for goodwill impairment.

Financial liabilities

Changes to the terms and conditions of bank debts/loans will require the application of IFRS 9 guidelines to determine if they result in a derecognition or modified profit/loss.

IFRS 7 requires disclosing loan defaults/violations, gains/losses from derecognition/modifications, as well as any reclassified hedge reserves.

Provisions

Record in accounts when there is an obligation for which the outflow of economic benefits is likely and can therefore be reliably estimated.

Income statement

Amortisations

Adapting to variations in asset consumption patterns due to periods of inactivity/under-activity.

Consider the freedom to decide on investment amortisation that generates employment.

Temporary workforce restructuring

• Recognise the exemption of fees for workers included in temporary workforce restructuring schemes as a subsidy, where they represent a significant amount. If not, as lower social spending.
• Make provisions for a failure to maintain employment levels (no tax deduction on penalties).

Recognising impairment losses in relation to commercial loans

Recognising and temporarily readjusting income/expenses for lease contracts where rent freezes, reductions or write-offs have been agreed.

Record non-refundable government support as subsidies in accounting:

• capital grants: cost of the guarantees assumed by banks/official credit institute.
• current grants: support to cover operating deficits.

Talentia Consolidation & Close accelerates and makes the closing and consolidation process more reliable

With Talentia Consolidation & Close, CFOs and consolidation managers can accelerate and make accounts closing and consolidation more reliable. They will also guarantee the transparency and consistency of their financial information. Financial statements will require expanded disclosure in relation to the information required by each IFRS, as well as management reports.

Talentia’s certified and secure consolidation and closing software complies with local and international standards. It offers a single platform for real-time financial accounting, consolidation, analysis, forecasting and reporting:

• Collects data securely from heterogeneous sources.
• Accelerates consolidation. Automates reconciliation and revision consistency check processes.
• Analyses and manages consolidated financial statements.
• Automates the production of consolidated financial schedules and reports in Microsoft Word© and XBRL