The novel coronavirus (COVID-19) pandemic is spreading around the globe rapidly. Entities need to carefully consider the accounting implications of this situation.

Under International Financial Reporting Standard (IFRS) IAS 36, Impairment of assets, an entity is required to test its assets such as property, plant and equipment, intangible assets and goodwill for impairment when indicators of impairment are present. In addition a mandatory annual impairment test for goodwill and intangible assets with indefinite useful lives must be performed.

Indicators of impairment may appear as a result of the economic conditions caused by the spread of COVID-19 and an entity may be required to perform an impairment test, and record an impairment loss, during an interim period in 2020.

An entity may recognize an impairment loss in one period but, in a subsequent period, there may be an indication that the impairment loss recognized in the prior period may no longer exist or may have decreased. In such cases, IAS 36 states that an impairment loss recognized in prior periods for an asset other than goodwill should be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized.

Read our Adviser Alert below for more information.

The way we work has changed in the past few weeks. Since remote work has proven to be an effective solution for many businesses, this new arrangement is here to stay. We need to adjust.

Have your employees been working from home during the crisis? If so, your business recovery plan will have to reflect this new work arrangement, including all the pros and cons that have become apparent in recent weeks.

Working from home has forced employees and managers to be flexible. In the coming weeks, businesses will have to make adjustments in order to maximize the benefits and mitigate the drawbacks of this new approach.

Adjusting to remote work

Work-from-home arrangements come with a lot of advantages, especially now that work–life balance has become a priority issue.

On the plus side, remote work allows employees to cut commuting, enjoy flexible hours, fit in errands and appointments more easily. This leads to reduced absenteeism and better productivity.

However, there are a few notable issues that businesses need to address with viable solutions for the long term. Studies have found that the most serious drawbacks include professional isolation, work spilling over into home life, fewer social connections with coworkers and longer work hours.

Don’t let distance become an issue

To prevent issues arising from unrestricted schedules or a fuzzy divide between employees’ professional and personal lives, we need to find new ways to structure work.

The most common strategies include holding regular meetings (using whatever tech tools are available to you), tracking hours via employee time sheets, and setting project milestones with deadlines.

And remember that the principles for leading effective teams haven’t changed, even though people are at home.

The three pillars are:

• Have a common goal;
• Create a positive and friendly work climate;
• Establish structured processes.

Standardize your processes, but make sure you enlist the help of employees in developing and adjusting these as needed.

Even though teams are working remotely, deliverables should still be checked and approved daily. Emails are often enough, but video calls are sometimes better because they motivate employees to organize their work space, get dressed for the day and shift into work mode.

Keep the lines of communication open

Active listening and communications should still be your top priorities. Managers should make establishing effective lines of communication a priority so that employees can reach out as needed. This will prevent people from feeling disconnected. One-on-one and team meetings are also needed to share information. If an employee isn’t in the loop, they can end up feeling ineffective.

Ultimately, these measures aim to keep employees engaged and focused on achieving their personal goals and the business’ objectives.

Create a safe work environment

Employers are responsible for protecting the health and safety of their workforce, even if employees are working from home.

If remote work becomes the new norm, you may need to schedule videoconferences to check that your employees have safe and ergonomic work stations. Meanwhile, it’s up to employees to report work-related injuries or illnesses. This is where mutual trust comes in.

If you haven’t already done so, it’s time to develop a health and safety policy specific to working from home. It should cover the following:

• The employer’s right to access the employee’s remote work space;
• Who provides the employee’s devices and office supplies;
• Which part of the home may be used as the employee’s work space;
• The employee’s obligation to report work-related injuries to their manager as soon as possible;
• Applicable terms of employment, including regular work hours and overtime;
• How this policy ties in with the employer’s other policies.

Social distancing measures are considerably changing how businesses operate, regardless of the type of business.

Your business will gradually resume following the government-imposed hold but your day-to-day will be different.

You must now worry about certain rules that you would never have thought of.

• How can your business adapt while minimizing the impact on your sales?
• How can you provide a secure environment for your employees and clients and remain competitive?

We’re here to help you identify the best solutions for you.

Adapting your operational model

In the past few weeks, some businesses have been put on hold, some are able to work from home and others have had to adjust their processes due to social distancing, and introduce stricter health measures.

Businesses must plan for a progressive return, taking into account the impacts of the new parameters. This plan must include both permanent and transitory measures.

Here are some things to reflect on:

• Analyzing your operational model;
• Analyzing your operational capacity;
• Identifying your breakeven point and reviewing your production costs.

Analyzing your operational model

How can you organize your factory, business or offices to practise social distancing? Can you carry on the way you did before the crisis? You need to review the sequence of operations and how work shifts are assigned. And you must ensure employee safety by reassessing your facilities layout and providing protective equipment. All of those factors will have an impact on your operational processes which should be redesigned to ensure safety, efficiency and effectiveness.

In the long run, it will be important to think about implementing process automation and integrating technologies to your operations. When reviewing your business activities, consider the shift to 4.0 or digital transformation.

The COVID-19 pandemic has brought about a great deal of changes and you should rethink your operational model and allow your business to adapt. Set new business goals with those changes in mind. Make informed decisions and take advantage of every opportunity. Dare to innovate!

Analyzing your operational capacity

How are social distancing measures affecting your ability to serve your clients and your production capacity?

In this context, it’s important to examine the impact on the business’ value chain. If social distancing diminishes your operational capacity, find out how client delivery timelines and the client experience are being affected. You might also have to readjust your production planning parameters, especially if they are integrated to your computer systems.

You can resolve this issue by identifying alternative solutions to improve your capacity and meet demand. Assess the costs of these solutions and calculate the return on investment of any changes or additions you need to make.

Identifying your breakeven point and reviewing your production costs

Production capacity has an impact on how a business’ fixed costs are absorbed. Seeing that your costs will be adjusted, calculating your breakeven point can help you determine your new cost absorption capacity. Any changes to your operations will influence your costs. Past production costs may no longer be accurate and they will have an impact on your gross margin or sales prices. Running a cost analysis is key to ensuring your business’ long-term profitability.

Our experts are here to help you identify the impacts of social distancing measures on your business and offer solutions. Every business is unique and there are plenty of solutions. With Solutions for SMEs, you have access to concrete, customized tools that will allow you to adapt to the current context while focusing on your business objectives.

We can help you stay on track!