COVID-19: Accounting Measures for Legal Entities

Supersociedades reported a new extension in the deadlines to submit financial statements for 2019: they would start on May 13. IASB explained how IFRS 9 – Financial Instruments should be applied during the period of economic uncertainty generated by the coronavirus.

In this editorial we relate the accounting measures related to legal entities during the coronavirus pandemic (COVID-19) in Colombia.

Supersociedades 2020 Deadlines: modified for the third time due to COVID-19

The Supersociedades informed, by means of External Circular 100-000008 of April 24, 2020, a new extension in the deadlines for companies to submit their financial statements as of December 31, 2019.

This is due to the fact that the measures adopted by the national government to contain the spread of the COVID-19 pandemic make it difficult for companies to comply with this obligation.

According to the new Circular 100-000008 of 2020, companies must start reporting their 2019 financial statements as of Wednesday, May 13 and until Wednesday, June 10, 2020.

Remember, in addition, that, with regard to the obligated parties and the information they must submit, the Supersociedades did not make any changes, so the provisions of External Circular 201-000008 of 2019 must continue to be observed.

IASB explains application of IFRS 16 – Leases due to COVID-19

On April 10, 2020, the IASB published a supplementary material in which it rescinds some important points on the application of IFRS 16 in accounting, for lessors and lessees, for leases that could be affected as a result of the impacts of COVID-19.

The IASB explains that in the event of significant changes in the terms of the lease, for example, regarding payments, the right to use the leased asset, or the term of the lease, the following cases should be considered:

1.If such changes arise from the application of the terms agreed at the beginning of the contract.

Inthe first case, the lessee recognizes the effect of the change in profit or loss, applying paragraph 38 of IFRS 16.

In the second case, the lessee shall apply paragraphs 44 to 46 of IFRS 16 and a lessor applies paragraphs 79 to 80 or paragraph 87 of IFRS 16.

In addition, if due to the contractual terms the lessee’s obligation to pay the lease payments is extinguished, it should consider derecognizing part of the lease payable liability. In relation to lessors, the IASB suggests that they assess whether they are required to account for impairments on leased assets due to the potential long-term economic effects caused by the pandemic.

See the IASB document in the following link.

IASB explains treatment of financial instruments in times of COVID-19

The IASB published on March 27, 2020 a document entitled IFRS and COVID-19 in which it addresses the application of IFRS 9 – Financial Instruments during the period of economic uncertainty generated by the coronavirus, which in Colombia must be applied by entities belonging to convergence group 1.

The IASB document addresses the determination of expected credit losses -ECL- for those financial instruments whose credit risk has increased significantly as a consequence of the spread of the coronavirus.

Because the current circumstances of uncertainty present a challenge for entities, the IASB recommends that, before recognizing a credit loss on a financial instrument, entities consider all historical, current and forward-looking information.

Adjustments to 2019 financial statements due to COVID-19

COVID-19 is a non-adjusting event in the 2019 financial statements because its impacts occurred after December 31, 2019 (IAS 10.10). This means that if an entity did not authorize its 2019 financial statements before the impacts of the coronavirus began to be known it should perform the following procedures in its reports:

–Assessits ability to continue as a going concern.

–Includedisclosures in the notes to the financial statements about the impacts of the coronavirus.

Impacts on the tax auditor’s opinion on 2019 financial statements: apropos of COVID-19.

Many tax reviewers will need to modify their opinions on the 2019 financial statements due to the need for them to consider the entity’s adequate disclosure of the effects of COVID-19 on its financial position.

Source: Actualize