Question

How Covid19 may affects the accounting field and word ?(800-1000 words)

Answer 1

When the spread of the pandemic increases, companies undergo conditions that are frequently correlated with a general economic downturn, including, but not limited to, stock market uncertainty and market value deflation, deteriorating credit, liquidity issues, more rises in government interference, growing unemployment, widespread decreases in consumer discretionary expenditure,-inventors Continuing such conditions may have a sustained negative effect on the financial position and outcomes of an individual.

Using forward-looking information is omnipresent in an entity's estimation of, among other items, the depreciation of non-financial assets (including goodwill), the viability of deferred tax assets, and the entity's ability to remain a concern. Unique complexities linked to the preparation of forward-looking information resulting from the pandemic and economic downturn include:

There is an incredibly large variety of potential tests. A recent news is that this question is well illustrated by Infectious Disease Experts Don't Know How Dangerous the Coronavirus Is Getting, Either. There is a very high degree of uncertainty about the ultimate pandemic trajectory and the direction and time required to return to a stable state
The associated economic impact of the pandemic depends heavily on hard to predict variables. Examples include the extent to which governments restrict corporate and personal activities, the associated level of citizens' compliance, the extent to which curve flattening is successful, and the nature and effectiveness of government assistance. The effect of these macro factors must then be converted into forecasts of their own potential cash flows by each agency. Nonetheless, agencies will need to make estimates in good faith, provide detailed documentation to support the basis for these estimates, and include adequate disclosure in key assumptions used and, possibly, their sensitivity to change.

The impairment tests for long-lived assets, intangibles and goodwill are perhaps the most acute examples of the increased challenge associated with forward-looking information. These non-financial assets utilize models of recoverability and impairment that rely on cash flow projections that are subject to the significant uncertainties noted above. Nonetheless, impairments create a new cost basis for the assets and do not allow the reported disability to be reversed afterwards. Estimates of good faith throughout the current reporting period may result throughout material impairments recorded

Severe declines in the fair value of many financial assets , particularly equity securities, have recently occurred. Likewise, debtors' ability to abide by loan terms and similar instruments has been adversely affected. Entities may need to think carefully and follow the correct guidelines for understanding disability and failure. Changes in pandemic-induced economic activity will cause many entities to renegotiate the terms of existing contracts and arrangements. Examples include service contracts, employee benefit plans, leases and the terms of other financial assets and liabilities.

An entity may find it challenging to separate recognized and unrecognized subsequent events in an extremely volatile global marketplace in which major developments occur daily (such as the daily reaction of the stock market to new information). Although organizations do not have all information "on hand" on the balance sheet date, an evaluation must be based on circumstances as they occurred on the balance sheet date until those information are collected. To organizations whose balance sheet date is February or earlier, we conclude that much of what is known about COVID-19 incidents as of the date of this report to U.S. operations should be viewed as an unrecognized rather than recognized occurrence.

As a result of COVID-19 and its associated effects, entities need to consider whether they have the ability, in their specific circumstances, to continue as an ongoing concern within one year from the date on which the interim or annual financial statements are issued (or are available, if applicable). The initial assessment (before considering management plans) will require an entity to consider, inter alia, (1) the extent of the operational disruption, (2) potential decreased demand for products or services, (3) contractual obligations due or anticipated within one year, (4) potential liquidity and working capital shortfalls, and (5) access to existing capital sources.

An entity can only base this initial assessment on information available as of the Financial Statements issuance date. An entity may be able to alleviate substantial doubt if it exists, if its plans are likely to be implemented effectively, and if implemented, mitigate the conditions that raise substantial doubts in the first instance, and will do so within one year from the date of issuance of the accounts. In addition, an entity must include detailed reports in its annual and interim financial statements when it discovers activities and circumstances that pose significant concerns about the entity's ability to remain a concern

Entities must consider carefully their specific situations and exposures to risks when assessing how current events can impact their financial statements. In particular, all of the relevant present or future consequences of the COVID-19 pandemic need to be communicated by financial statements and associated financial statement reports. It is also important for management to consider the threats faced by the companies and how they are affected. In addition to its disclosures in the footnotes to the financial statements, SEC registrants must consider whether to disclose information in areas such as MD&A or the risk factors section. The rest of this Financial Reporting Alert is intended to deal with this matter