Every business that is being run in the world has been impacted due to the coronavirus pandemic. Some businesses have even closed down due to a lack of revenue generation. But the insurance industry is most impacted by it due to the claims concerning coronavirus treatments and testing under health coverage.
This has made it very difficult for companies to manage financial reporting, making them work harder to prepare reports and financial statements to see their actual financial status.
Even though every company has its accountant or a team of accountants, it is always better to take extra help from someone providing financial reporting services. It will assist you in effectively managing your accounting and bookkeeping tasks.
But before moving on to that, let’s have a look at the way coronavirus has impacted financial reporting.
Impacts of COVID-19 on Financial Reporting
- Liquidity: We don’t know how long the pandemic will last, and maintaining a proper cash flow can be an issue in such a case. Companies need to ask themselves if they have enough cash to survive. Due to the high uncertainty associated with financial impacts, other uncertainties can lead to doubting the firm’s capacity to operate. In such a case, proper financial reporting services should be hired to cater to different companies’ needs.
- Impairment Evaluation: Companies are required to evaluate the possible impairment against non-financial assets at the end of the year. It is usually done when the firm is unable to recover its current value. The firm must figure out the recoverable asset amount while assessing the impairment. For this, the hired financial reporting service should estimate cash flow for the future, along with expected variation.
- Contract Alteration: When the pandemic started, none of the companies knew what the future had for them in-store while making the contracts. But the way things have unfolded has impacted the finances of the companies. In such a case, changes to existing contracts can be made, like how debt agreement terms are amended. But before that happens, the firm needs to check if making changes to the agreement will lead to it being extinguished. If that is the case, it must be visible in the financial reports prepared by financial reporting service providers.
- Fair Value Measurement: Every firm needs to assess the value of their assets and liabilities against a specific date based on certain assumptions related to the current market condition. It will be dependant on the severity of the pandemic. The firm’s disclosures must be included in the financial reports prepared by their financial reporting service providers.
- Income Tax and Government Assistance: There were different types of measures initiated by the government to extend their support to the businesses that were unable to generate proper cash flow. These measures will impact financial reporting and might come under the standard scope of financial instruments, income tax, government grants, etc. The role of the financial reporting service provider will vary in each case.
- Increasing Reporting Pressure: The uncertainty has created a lot of pressure on accounting and financial professionals as they have to work in situations that were not there earlier. Financial reporting service providers’ role has become more challenging under current circumstances as now they are required to report to different parties like investors, boards, stakeholders, etc., more frequently.
The current pandemic situation has undoubtedly created many problems for the industries, but the most affected one is the insurance industry. Preparing financial reports has become necessary to let the interested party know about the company’s situation, which can be problematic in the current disrupted working conditions.
A financial reporting service provider’s task becomes challenging, but they can tackle it with proper and relevant skills and experience. But for that, you need to have a service provider who can look after your needs properly and help you out with the reports.
If you are looking for one such provider with talented and well-experienced employees working with them who can handle such a situation. In that case, you can rely on FinAcc Global. FinAcc Global is one of the leading accounting and bookkeeping outsourcing company which offers unmatched back-office accounting support to insurance companies.