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Property plant and equipment

29 April 2020

The recognition and measurement of existing, or additions to, property, plant and equipment may be significantly affected by changes resulting from coronavirus. This could include changes to strategy, decreases in expected future cash flows or costs incurred as result of delays to the development or manufacture of assets.

Impairment of non-financial assets

29 April 2020

Entities will need to make assessments on the recoverability of its assets in light of the issues caused by the coronavirus pandemic. Where there are indicators of impairment, an impairment review will be required.

Intangible assets

29 April 2020

Entities holding significant intangible assets may find that changes in strategy or reductions in forecast revenues due to coronavirus will not only provide evidence of impairment but will also reduce the ability of the entity to meet the recognition criteria of intangible assets. This could mean an increase in costs being expensed to the P&L with knock on consequences for performance related pay, bonuses and covenants.

Shared-based payments

29 April 2020

During this period of economic uncertainty, when cash is limited, entities may seek to incentivise employees using non-cash benefits such as share-based payments. As well as this, existing share-based payment schemes may vest based on conditions such as employment continuity or KPI achievement which may be impacted by the current economic volatility.

Defined benefit pension schemes

29 April 2020

With the impact of coronavirus on markets, mortality and interest rates, net defined benefit pension scheme liabilities under FRS 102 may increase in the short term mainly due to a fall in the value of any plan assets. They may also be impacted, to a less certain degree, by the effects of changes in the principal actuarial assumptions used to measure the defined benefit obligation.

Holiday pay accruals

29 April 2020

One of the government measures announced to support entities employing key workers during coronavirus was an extension of the window that employees can take their annual leave. FRS 102 (section 28 ‘Employee Benefits’) requires entities to accrue for any short-term employee benefits. Despite the reference to key workers in the government announcement, the change to the legislation applies to all businesses.

Accounting for government grants including the Job Retention Scheme

29 April 2020

The government and local authorities announced several grants in March (updated April 2020) including the Job Retention Scheme (JRS), the small business grant fund (SBGF) and the retail, hospitality and leisure grant fund (RHLG).

Revenue recognition

29 April 2020

The outbreak of coronavirus is likely to have an adverse impact on the demand for goods and services and supply chain cycles are likely to be disrupted. The knock-on impact on working capital could result in customers being unable to pay for goods or services.

Events after the reporting date

29 April 2020

Coronavirus is likely to impact on the recognition and disclosure requirements for events after the reporting date.

Investments in associates, jointly controlled entities and subsidiaries

29 April 2020

The economic events surrounding coronavirus will likely have a significant effect on the businesses of associates, and jointly controlled entities and subsidiaries. There is an increased likelihood of impairment and of significant changes in fair value and care will be needed to ensure this is reflected correctly from the perspective of the investor’s accounting.

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