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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.
Introduction – Setting the scene
The year 2020 has witnessed the 21st century’s most extreme economic crisis. Unlike the recessions occurring in the past two decades, this crisis is the result of a pandemic caused by the coronavirus (covid-19). For most entities, operating in a challenging economic environment amid heightened uncertainty has added to the complexities in reporting the impact of covid-19 in their financial statements.
What are the panel’s messages for applying IFRS Standards in 2020?
The panel 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.