Covid-19: Accounting implications in both 2019 & 2020 Financial Statements (Mexican Financial Reporting Standards)
Covid-19:: Accounting implications
The global economy in the 21st century already faced an important crisis in 2008. On that occasion, the crisis stemmed in the real estate industry in the USA and, subsequently, affected the international financial markets, situation that questioned the validity of the financial reporting standards issued by the main standard-setting bodies.
To deal with this crisis regarding financial reporting standards, the G-20 requested those bodies in charge of issuing the international standards, the issuing of accounting standards that would allow entities to recognize in their financial information the economic aspects resulting from the crisis.
In that same year, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) of the United States, took on the commitment of improving confidence in the financial information prepared for the capital markets and steer efforts for maintaining high-quality accounting standards besides accelerating regulatory convergence at the international level. Therefore, the normativity was issued at a global level for the recognition of the economic effects affecting corporations, not only by considering historic and current information as had been done traditionally, but also taking into consideration the forecasted information.
Facing the current situation that the global economy is facing due to the COVID-19 pandemic, declared by the World Health Organization on March 1, 2020, and the heath emergency published by the Mexican Government on March 30, 2020 in the Official Gazette, the question arises as to whether the current accounting normativity at the international and Mexican level, will allow corporations to recognize the effects, which in their financial information could have the current and future situation of the COVID-19 pandemic.
The response is, in this case, favorable. Both the International Financial Reporting Standards (IFRS) and Mexican Financial Reporting Standards (NIF for the acronym in Spanish), provide the measuring, presentation and disclosure that corporations would have to undertake in their 2019 and 2020 financial statements to recognize and disclose the possible COVID-19 pandemic.
The effects of the pandemic in the economic activity in Mexico are already occurring and are affecting the various aspects of business entities. In some industry sectors, due to their operations, the effects are taking place immediately, such as tourism, manufacturing, financial, entertainment, health, just to name a few, while for other industry sectors, the effects will be imminent, situations that are and will be also affecting the financial information of corporations.
The analysis herein presented reflects the interaction of Mazars at an international and local level, mainly what is being commented by the issuers of accounting standards of the main world economies, regulators and those interested in financial information. Any change that may arise in the accounting profession at an international and local level, shall be updated and informed, since they are topics still being discussed within the accounting profession.