IAS 1 Presentation of Financial Statements requires management to assess a company's ability to continue as a going concern. The going concern assessment needs to be performed up to the date on which the financial statements are issued. The assessment relates to at least the first twelve months after the Statement of Financial Position date, or after the date the financial statements will be signed, but the timeframe might need to be extended. Material uncertainties, for example, the coronavirus effects that cast significant doubt on the company's ability to operate under the going concern basis need to be disclosed in the financial statements. It is highly likely that many companies large and small, and particularly in certain sectors, will have issues relating to the coronavirus that need to be considered by management. There will be a wide range of factors to take into account in going concern judgments and financial projections including travel bans, restrictions, government assistance and potential sources of replacement financing, financial health of suppliers and customers and their effect on expected profitability and other key financial performance ratios including information that shows whether there will be sufficient liquidity to continue to meet obligations when they are due. 1. You have been hired to advise management of two companies: one is an airline company and the other is in the pharmaceutical industry on how management should assess the existing and anticipated effects of COVID-19 on each of the company's activities and the appropriateness of the use of the going concern basis.
IAS 1 Presentation of Financial Statements requires management to assess a company's ability to continue as a going concern. The going concern assessment needs to be performed up to the date on which the financial statements are issued. The assessment relates to at least the first twelve months after the Statement of Financial Position date, or after the date the financial statements will be signed, but the timeframe might need to be extended. Material uncertainties, for example, the coronavirus effects that cast significant doubt on the company's ability to operate under the going concern basis need to be disclosed in the financial statements. It is highly likely that many companies large and small, and particularly in certain sectors, will have issues relating to the coronavirus that need to be considered by management. There will be a wide range of factors to take into account in going concern judgments and financial projections including travel bans, restrictions, government assistance and potential sources of replacement financing, financial health of suppliers and customers and their effect on expected profitability and other key financial performance ratios including information that shows whether there will be sufficient liquidity to continue to meet obligations when they are due. 1. You have been hired to advise management of two companies: one is an airline company and the other is in the pharmaceutical industry on how management should assess the existing and anticipated effects of COVID-19 on each of the company's activities and the appropriateness of the use of the going concern basis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:IAS 1 Presentation of Financial Statements requires
management to assess a company's ability to
continue as a going concern. The going concern
assessment needs to be performed up to the date
on which the financial statements are issued. The
assessment relates to at least the first twelve
months after the Statement of Financial Position
date, or after the date the financial statements will
be signed, but the timeframe might need to be
extended.
Material uncertainties, for example, the coronavirus
effects that cast significant doubt on the
company's ability to operate under the going
concern basis need to be disclosed in the financial
statements. It is highly likely that many companies
large and small, and particularly in certain sectors,
will have issues relating to the coronavirus that
need to be considered by management. There will
be a wide range of factors to take into account in
going concern judgments and financial projections
including travel bans, restrictions, government
assistance and potential sources of replacement
financing, financial health of suppliers and
customers and their effect on expected profitability
and other key financial performance ratios including
information that shows whether there will be
sufficient liquidity to continue to meet obligations
when they are due.
1. You have been hired to advise management of
two companies: one is an airline company and the
other is in the pharmaceutical industry on how
management should assess the existing and
anticipated effects of COVID-19 on each of the
company's activities and the appropriateness of the
use of the going concern basis.
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