6 Ways the COVID-19 might affect Financial Statements of companies

6 Ways COVID-19 might affect Financial Statements of Companies

The coronavirus (COVID-19) pandemic has shocked and shake the whole world, and it is significant attention in recent weeks for the world. On the one hand, businesses and firms are extremely concerned about the health of workers, and on the other hand, they are also concerned about the progress of their businesses. Most CEO’s are thinking of how they will meet their financial results and performance.

Though the effects of COVID-19 are still occurring, and we don’t know how devastating they can be. As the outbreak continues to affect almost all businesses worldwide, U.S. companies, have already started making emergency plans and reworking their goals and budgets to minimize the risks. Likewise, investors and added stakeholders are also curious about how companies will respond to this threat.

Rules for Business Reporting

The eruption has coincided with the deadline for calendar-year entities to set and file their reference reports. So how (and when) should companies refer to damages and effects on their financial statements? Disclosure requirements should be realistic, and all the financial statements must disclose the truth to investors and stakeholders.

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In GAAP, there are two types of events:

Recognized Subsequent Events

These events show all the necessary and vital suggestions and proofs about the conditions that were present at the date of the balance sheet and the hurdles that the business faced in the preparation of balance sheet and other financial statements.

Unrecognized Subsequent Events

In this category, businesses and firms show the proof about conditions that were not present at the date of the balance sheet and arose after the due date.

gaap events

Factoring COVID-19-Related Risks into Business Statements

Low GAAP, U.S. companies, may be required to businessperson COVID-19-related risks into their financial statements. Some balance sheet accounts that you must look closely are:

Assets (especially current assets)

Companies should ruminate the potency for impairment, as advisable as the neediness to change or adjust the cash line projections and other non-quoted business instruments. Business assets reported at fair assessment may lead to unforeseen losses during this pandemic situation. However, cash and cash equivalents are a vital part of the balance sheet, but these will be affected more than any other account.


Customers, adversely stirred by the irruption, may be unable to pay outstanding invoices. This state could conclude further attribute and liquidity risks, higher than habitual bad debt, and steady impairments and write-offs. Cash flows from dealing may also be studied.


The eruption may break activity chains and fruitfulness. Companies with reduced or ineffectual production susceptibleness may be unable to allocate expense costs to itemization as they ordinarily do. In gain, wares that can’t be upturned over because of steering restrictions may help someone to be evaluated for decay. Finally, changes in prices and change in the structure might affect the business badly.

Pensions and Post-Retirement Plans

Financial activity volatility has stilted the mensuration of these accounts. Companies may feature to revisit both the prospective refer to counselling assets and the funded position of the plans.


If estimates of earnings of international subsidiaries interchange, companies may hold to reconsider some of their tax strategies, or they may not be fit to see all deferred tax assets.

Goodwill and Other Intangible Assets

Subsidiaries in areas intemperately moved by COVID-19 may see their revenues or net income driven adversely by the outbreak. This may be a testing time for goodwill and added intangibles. Additionally, there is a possibility that businesses and firms might have to assess the damages and adverse effects of COVID-19 more than once in 2020.


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