Homiyar Wykes discussed the key challenges in Going Concern Assessment in the COVID-19 world during our webinar on IFRS Update: Impact of COVID-19 on Financial Statements on 24 July. Here are the key points that were covered in the presentation.

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© Square Mile Global Consulting Limited, London
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3. IFRS
IPSAS
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Blockchain
Cybersecurity
Data Analytics
21st Century
Management
Programme
Saket Modi, CFA
▪ Facilitated IFRS workshops for preparers and users of financial statements from over 50
countries in Europe, Africa, Middle East and Asia
▪ Previously worked with Lloyds Bank and Ernst & Young
Homiyar Wykes, ACA (ICAI)
▪ London-based with over 25 years of experience across the Big 4 accounting firms and
various industries
▪ Extensive IFRS and US GAAP experience internationally in industries such as
commodities, transportation, logistics, metals and mining

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Global financial reporting language
(140+ Countries)
ComparabilityTransparency
Helps users make informed economic decisions

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Bill Gates said in his 2015-TED talk
“If anything kills over 10 million people in the next few decades it’s
highly likely to be a highly-infectious virus rather than war. Not
missiles, but microbes.”

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Measurement
of Assets
and
Liabilities
Going
Concern and
Liquidity
Assessment
Working
capital
(cash flows)
Demand
(revenue,
contract
fulfilment)
Supply
chain
(disruption,
impairment)
Legal
obligations
(force
majeure)

8. ▪ What is the impact of COVID-19?
- Demand, sales and margins
- Historical information: Less relevant now for predicting the future
▪ Revise future plans and budgets - significant revisions?
- Uncertainty in the business environment makes this assessment challenging
- Prepare a cash flow forecast for at least 12-18 months
▪ Key considerations
- Multiple scenarios including severe downside scenario that is realistically possible
- At least one sensitivity to set out the scenario under which the business runs out of
cash and explain the likelihood of such a scenario
- Assumptions about length of downturn and parts of business affected based on the
impact of different economic scenarios of recovery
- Impact of changing government policies on the business plan
- Access to financing – debt modifications and government assistance
- Disclosures on uncertainties and liquidity position, including sensitivity analysis
- Prepare financial statements on net realisable basis (if not a going concern)
- Audit evidence
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“We now expect 2020 organic capital spend to be around $12 billion,
around 25% below our prior full-year guidance. In Upstream, this
includes a reduction of around $1 billion in spend on short-cycle
onshore activity, including in BPX Energy, as well as deferral of
certain exploration and appraisal activity and optimisation of our major
project spend. In Downstream, we expect a reduction in spend of
around $1 billion, which includes reduced spending across our fuels
marketing, refining and petrochemicals businesses.”

10. ▪ Where there are material uncertainties relating to going concern,
check whether the financial statements
- Adequately disclose the relevant events or conditions, and management’s plan to deal
with them; and
- Clearly disclose that there is a material uncertainty that may cast significant doubt on
the entity’s ability to continue as a going concern
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Material uncertainty relating to going concern is a key audit matter

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https://smglobal.co.uk/training-solutions/
info@smglobal.co.uk
Saket Modi
Director
Square Mile Global Consulting
https://www.linkedin.com/in/saketmodi/