On or about 28 September 2020, Mary Tokar, International Accounting Standards Board (IASB) member, and Sid Kumar, IASB Technical Staff Member, has discussed key financial reporting considerations for preparers, auditors, investors and regulators as they tackle the complexities associated with covid-19 induced disruptions.
The article draws on the views of an interdisciplinary panel on ‘Applying IFRS Standards in 2020—impact of covid-19’ at the IFRS Virtual Conference 2020 in September.
The panel focused on:
- what entities need to consider when developing assumptions in preparing financial statements in times of heightened uncertainty; and
- what information to disclose about the assumptions used.
The panel also explored challenges that entities face in preparing their financial statements; auditors face when auditing this information; and investors face in making decisions based on the reported information.
The panel discussed some principles to consider.
- users of financial statements (users) expect entities to base their estimates in financial statements on assumptions consistent with management’s expectations of business performance and the operating environment at the reporting date.
- these assumptions should be developed using reasonable and supportable information available to management.
- users expect transparency into the key assumptions used. Entities should provide unbiased and clear information about the key assumptions.
Reporting information in this manner allows users to understand the extent to which the financial results can help them in making predictions about the future.
Source: ISCA, 5 November 2020.