The business and operations of many entities have already been seriously affected by the rapid global spread of COVID-19 and related government actions. Unfortunately, many businesses will continue to be affected for some time. This has consequences for their value and the value of many of their commercial assets.
In this volatile environment, any impairment of goodwill and other long-lived assets has the potential to materially reduce reported earnings. While impairment losses provide only a lagging indicator of negative developments, this does not reduce the importance of ensuring that the reported values for goodwill and other intangibles reflect an appropriate value. This includes any impairment in value reflecting the economic impact of COVID-19.
Management teams that perform impairment testing fully in-house may find this requirement a significant addition to their role at a time when, more than ever, management’s full attention on operations is crucial. This is also an area that will likely be subject to particular scrutiny and challenge by external auditors.
How can Grant Thornton help?
Preparers of financial statements will need to be agile and responsive as the situation unfolds. Having access to experts, insights and accurate information as quickly as possible is critical – but your resources may be stretched at this time. We can support you as you navigate through accounting for the impacts of COVID-19 on your business.
Grant Thornton valuation experts provide time critical independent support and advice to organisations who must review or quantify any impairment risks relating to intangible assets and goodwill caused by the impact of COVID-19. Now more than ever the need for businesses, their auditor and any other accounting advisors to work closely together is essential.
If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or contact or your local member firm.