According to the risk assessment of the Robert Koch Institute of 9 March 2020, the so-called SARS-CoV-2 or COVID-19 („coronavirus“) presents a very dynamic and serious situation worldwide and in Germany. It is therefore debatable what financial impact the virus will have on the economy and not whether there will be any financial implications. The Lufthansa Group, for example, recently reported that it is facing drastic declines in bookings and numerous flight cancellations due to the virus. Flight capacity is therefore to be reduced by up to 50% to mitigate the financial consequences of the slump in demand. However, it is necessary to examine whether the coronavirus also has an economic impact on companies‘ financial reporting as of 31 December 2019.
IAS 10, addressing events after the balance sheet date, is applicable in this respect. Accordingly, it must be qualified on an individual company basis whether the coronavirus is an event that requires consideration or not. The qualification should take into account the fact that the spread of the virus is an ongoing process and not a point in time event. Events that provide substantial evidence of conditions that already existed on the balance sheet date, so-called adjusting events, must be taken into account. The outbreak of the coronavirus was recorded in China in December 2019, whereas the cross-border spread of the virus was recorded at the beginning of 2020. For the majority of companies, this will therefore be a non-adjusting event after the balance sheet date, as it was not yet foreseeable as of 31 December 2019 that the virus would spread so strongly. Consequently, there would be no adjustment to the figures in the financial statements.
In addition, for significant events that do not require adjustments, the notes to the financial statements should disclose the nature of the event and the related reasonable estimate of its financial effect or indicate that such an estimate is not possible.
Furthermore, in accordance with IAS 10, it should be noted that the going concern status as of 31 December 2019 cannot be assumed if events after the balance sheet date indicate that this assumption is no longer appropriate. Information about the future must be taken into consideration for this purpose. At least the first twelve months after the balance sheet date must be included in the consideration.
In the management reports, developments may be reflected in the risk reports and/or forecast reports. Companies that do business with China, Italy and other countries in which the virus has spread rapidly are particularly affected by this situation.
Covestro and Villeroy & Boch have decided to address the coronavirus in the forecast report within the management report for the 2019 financial year. Both companies are addressing the fact that the effects of the issue cannot be foreseen at the current time.
The assessment of the effects of the coronavirus on the 2019 financial reporting must be made by the management of the companies as close as possible to the date of the audit opinion due to the new developments that occur daily.