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Income and expenses that would be earned or incurred regardless of COVID-19 (e.g. When determining the impacts of COVID-19, we believe a company should consider only the income and expenses that are incremental and directly attributable to COVID-19. Ultimately, companies need to ensure that the chosen presentation is not misleading and is relevant to the users’ understanding of financial performance.ĬOVID-19 related income and expenses must be incremental and directly attributable Instead, the company should consider disclosing them in the notes. In that case, we believe it may be impracticable or less meaningful to present the impacts on the face of the income statement. affecting nearly all line items of the income statement. In some cases, a company may be able to determine the impacts of COVID-19 but find that they are pervasive – e.g. If the impacts cannot be determined on a non-arbitrary basis, we believe the company should not present them on the face of the income statement, but consider disclosure in the notes, providing quantitative (when possible) and qualitative information and stating whether only some, or all, of the effects have been identified. As a company adjusts its operations to the new reality, making that cut is becoming more and more challenging.

Quantifying the impacts of COVID-19 on a non-arbitrary basis may require significant judgment – distinguishing between income and expenses that are part of normal operations versus those that specifically relate to COVID-19. quantify them reliably) and on the pervasiveness of those effects to the financial performance of the company. A company’s approach for COVID-19 will depend on its ability to determine the impacts on a non-arbitrary basis (i.e.

Under IAS 1 1, when items of income or expense are material, a company discloses their nature and amount separately, either on the face of the income statement or in the notes. How and where should the income statement impacts of COVID-19 be presented? We also looked at how US registrants – domestic and foreign private issuers – have chosen to communicate the impacts of COVID-19 to date. Here we summarize key items companies should consider when determining their approach. IFRS Standards allow them to display certain amounts separately on the face of the income statement, but identifying the effect specifically attributable to COVID-19 may be difficult disclosure in the notes may be a better route. From the IFRS Institute – August 28, 2020Īs COVID-19 continues to affect financial performance, explaining its effect on the income statement is becoming important for many companies.