Question

IAS 1 Presentation of Financial Statements requires management to assess a company’s ability to continue as a going concern. The going concern assessment needs to be performed up to the date on which the financial statements are issued. The assessment relates to at least the first twelve months after the Statement of Financial Position date, or after the date the financial statements will be signed, but the timeframe might need to be extended.
Material uncertainties, for example, the coronavirus effects that cast significant doubt on the company’s ability to operate under the going concern basis need to be disclosed in the financial statements. It is highly likely that many companies large and small, and particularly in certain sectors, will have issues relating to the coronavirus that need to be considered by management. There will be a wide range of factors to take into account in going concern judgments and financial projections including travel bans, restrictions, government assistance and potential sources of replacement financing, financial health of suppliers and customers and their effect on expected profitability and other key financial performance ratios including information that shows whether there will be sufficient liquidity to continue to meet obligations when they are due.
You have been hired to advise management of two companies: one is an airline company and the other is in the pharmaceutical industry on how management should assess the existing and anticipated effects of COVID-19 on each of the company’s activities and the appropriateness of the use of the going concern basis.

Answer 1

Answer:

Impacts of Covid on Airline Company :

I am satisfied to give the report on assessment of IAS 1 Presentation of fiscal Statements on the Company due to COVID 19 and the plausible effect on the organization and the capacity to proceed as a going concern.

The disclosure necessities of IAS 1 requires the organization to unveil every single material occasion in the promptly succeeding a year and furthermore if any material occasion has occurred after the date of balance sheet till the date of signing of the accounting report or balance sheet.

Considering COVID 19 has started from end of Dec 2019 and had begun to top during 2020, it is sure that the effect on the fiscal summaries will be material. A considerable lot of the nations have forced lockdown wherein the individuals are not permitted to move out of their homes for a prolonged timeframe. The majority of the nations have likewise forced travel boycott and the airlines are grounded with no tasks. This has affected the aircraft business seriously as they need to deal with their fixed costs which are extensively high and simultaneously there is no reveneu generation at all.

So the premise of determining the going concern reason for the aircraft organization would be whether they have adequate money equalization to take care of their liabilities throughout the following 3 months and in the event that they cannot and furthermore in the event that they feel that considerably after resumption of flight activities, they won't have the option to pay their liabilities, at that point they can't outfit the fiscal reports on a going concern premise.

Impacts of Covid on Pharmaceutical Company :

I am satisfied to give the report on evaluation of IAS 1 Presentation of Financial Statements on the organisation due to COVID 19 and the likely effect on the organization and the capacity to proceed as a going concern.

The disclosure prerequisites of IAS 1 requires the organization to reveal every single material occasion in the promptly succeeding a year and furthermore if any material occasion has occurred after the date of accounting report till the date of signing of the balance sheet.

It very well may be said that COVID 19 positively affects the pharmaceutical organizations, considering in the event that the organization can discover the vaccination, at that point it will materially affect the fiscal reports of the organization. Further although the majority of the nations have forced lockdown, all the nations have permitted gracefully of basic administrations and medications has been characterized as basic administrations. In this unique circumstance, it tends to be securely accepted that the customary activities of the organization isn't seriously affected, anyway the organization should survey the effect of COVID on its sales and verify that is has adequate cash flows with the tasks of the organization. The organization can reveal this finding in the fiscal summaries and completely notice that there is no danger to the going concern premise of the organization..