Coronavirus has no impact on impairment test valuations in 2019 financial statements

The emergency caused by the Covid-19 is having a significant impact on the operations for the companies, including those concerning the preparation of financial statements. While preparing the financial statements, directors are wondering whether the current emergency is an element that should be taken into account when assessing impairment indicators and if the estimate of future cash flows should be affected.

Last May 5th 2020, the OIC Foundation published the final version of the communication concerning, specifically, the procedure for the impairment test as a result of the health emergency caused by COVID-19 on the financial statements at 31.12.2019.

In particular, it has been confirmed the following:

  • the epidemic, as provided for in document OIC 29, is an event occurring after the end of the financial year, and therefore, on an accruals basis, should not be included in the values of the financial statements as at December 31st 2019. However, it should be reported in the notes to the financial statements in the subsequent events section;
  • for the purposes of the impairment test calculation on fixed assets, as provided for in OIC 9, the health emergency should not be considered as an indicator of impairment in the financial statements as at December 31st 2019;
  • furthermore, if other indicators for the impairment test exist and so it must be carried out, the effects of the epidemic must not be taken into account in estimating future cash flows when determining the value in use of the assets.

The communication specified these provision are also applicable to condensed and micro financial statements.

Finally, the OIC Foundation defined the indications related to the concept of going concern, providing interpretative elements and useful clarifications concerning the provisions of Article 7 of Law Decree 23/2020, which introduced the possibility to make an exception, where certain conditions exist, from the going concern assumption.

Mattia Dassi