The Grant Thornton International IFRS team has published COVID-19 accounting considerations for CFOs: Impairment of intangible assets and goodwill.

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.

This publication contains some issues for management to consider in assessing impairment together with some direction as to how best to respond to them.

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What does the economic future hold for us in Quebec and elsewhere in these turbulent times? An informed discussion on the emerging outlook.

In the first of the one-on-one discussion series organized by our firm, on May 21, 2020, President and CEO, Emilio B. Imbriglio, spoke with Martin Coiteux, Head of Economic Analysis and Global Strategy at the Caisse de dépôt et placement du Québec, about the economy and its future prospects. You can watch this interview online at any time, but here’s an overview.

A sudden crisis, a serious but temporary blow

Martin Coiteux began by emphasizing that the current crisis is not comparable to the one in 2008-2009, when Quebec was able to pull through with far less damage than other regions around the world. The current crisis is much more serious, although it cannot be compared to the Great Depression of the 1930s either.

“Our economy has been put into hibernation for public health reasons, resulting in a severe, albeit temporary, downturn because there will be a recovery.”

China as a point of reference

Globally, China was the first country affected by the virus and its economy resumed more quickly than elsewhere.

“It’s interesting to look at China, because you learn a lot about the nature of the recovery that lies ahead. Some sectors are recovering and others are lagging.[…] Production is recovering much faster than consumption in some sectors. Demand remains relatively depressed. Sectors are between 60% and 90% of normal activity,” Martin Coiteux stated.

Martin Coiteux added, “Generally, our economy declined less than in Europe and more than in the U.S.” The oil sector carries more weight in Canada than in the United States, which means, among other things, that our economy is more greatly affected. The impact of the crisis on the Canadian economy is somewhere between Europe and the U.S.

Sector outlook in Canada

Martin Coiteux discussed the impacts and durability of the COVID-19 effect on industries. According to his analysis, resilient firms are those that experience a small to moderate impact on employment, depending on the level of the effect, while industries that are more severely affected are equally divided into two categories related to the persistence of the setback.

Martin Coiteux explained in particular that the hardest-hit sectors are those whose activities depend the most on proximity to people (e.g. culture and recreation, accommodation and food services), while there is a lesser impact in sectors such as finance, public administration or professional services, where technology and distance are applied.

He stated that it also shows “the need to prioritize technological investments in the future. Even after the crisis is over, the trends will continue and become more pronounced. […]. This crisis, which is unlike any other, does not signal a disruption, but rather confirms trends, such as teleworking.” (For more information on the sectors Martin Coiteux discussed, view the interview video and go to the slide at 13 m., 31 s.)

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Assistance measures: massive support

Emilio B. Imbriglio asked Martin Coiteux about the governments’ unprecedented financial measures, in particular, the federal government, where assistance is already almost equal to the Caisse’s total assets of $300B.

When asked how Canadians will be able to repay this burden, Martin Coiteux stated that, under normal conditions, “no government would have chosen to create a $300B deficit this year”. Rather, it should be seen as an investment, because without such an effort, the economic recovery would have been delayed for years: the fate of the Quebec economy would have been business bankruptcies, high unemployment and depleted discretionary income.

“It’s an investment, it has to be repaid,” Martin Coiteux stated. “What will help us is that interest rates will remain low for a very long time. Sustained by interest rates below economic growth, the burden is still manageable.”

The Caisse’s role

Martin Coiteux went on to talk about the Caisse’s dual mandate: manage depositors’ returns and ensure Quebec’s economic growth. In this respect, the head economic analyst emphasized that “the Caisse is solidly established and works closely with portfolio companies to ensure that the best decisions are made to get through this difficult period. Even for organizations that are not in the portfolio, we have already announced a $4 billion envelope based on certain criteria, which also supports companies in their recovery. […]. For the post-COVID period, there are also priority investments for the Caisse and companies with projects. We were here before and during the crisis. We will also be here during and after the recovery.”

With respect to the stock market, Martin Coiteux argued that at the worst of the stock market meltdown in mid-March 2020, the situation appeared to be turning into a liquidity crisis. The markets were anticipating a credit crisis potentially greater than in 2008-2009. By intervening massively, the central banks and the U.S. Federal Reserve locked in, at least for the time being, the credit crisis that could have resulted.

What are the lessons learned?

In closing, Emilio B. Imbriglio asked Martin Coiteux to look 15 to 20 years into the future and see what lessons we have learned from this extraordinary experience.

“I am confident we can say we had the capacity to reinvent ourselves when necessary, that we accelerated the necessary investments, and that we fostered economic and social resilience,” Martin Coiteux stated.

View the entire economic discussion online (in French only).

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Denis Brisebois
Vice President | Tourism-Leisure-Culture | Management consulting

As the lockdown is gradually being lifted, businesses and organizations in the tourism, leisure and culture sector are entering the critical yet complex period of economic recovery. Do you have all the keys in hand to get through this turbulent period?

To cope with this new reality and weather the ups and downs, organizations must review their activities and processes in an effort to implement the best solutions.

The sector can get a new boost even if it’s likely to experience a great deal of uncertainties in the coming months. Some businesses will be more affected than others but those that can adapt will come out stronger and better equipped. It’s an opportunity to get back up on the right foot and ensure a sustainable future.

Seizing opportunities to restart your business or limit losses

Well before this crisis, organizations were already dealing with a number of issues, including demographic changes, the influence of technology and an increased focus on a healthy environment for clients.

The pandemic is forcing the sector to speed up its transformation. Certain trends, such as teleworking and buying local, have become vital. Businesses must transform and adapt, taking into account these emerging needs.

They must also endure new constraints due to the context and fluctuations brought about by the virus. Clients’ habits have changed and how they will behave post-crisis is still unclear.

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Assessing your business’ position and implementing effective solutions quicker

An in-depth analysis of your business’ environment and position will help you make more informed decisions. You have several options:

  • Go for it: Seize this opportunity to increase your activities and boost growth;
  • Hibernate: Keep your expenses as low as possible and delay reopening;
  • Focus on what’s essential: Reduce your activities to a minimum and focus on what you do best until the economy recovers;
  • Diversify: Seize this opportunity to develop a new offer and solicit another clientele;
  • Merge: Team up with a partner or business with a complementary service offer and limit costs;
  • Close or sell: This may be the best solution while you can still get back the maximum value for your business given the context;
  • Make an acquisition: This could be an opportunity to invest in a field or business to which you can contribute added value;
  • Transform and reinvent yourself: You may realize that you have everything you need to innovate and modernize your organization.

If you want to take action but don’t know where to start, our team of experts can help you avoid some unpleasant surprises.

We’ve put together more than 20 support programs and others will be announced in the days and weeks to come for various industries. It can be daunting to navigate through so many different offers and programs. So, let our experts help you optimize your organization’s capacity to get financing.

If you want to secure a future for your business, you must not only persevere but also demonstrate agility and creativity. It won’t be easy but there’s hope for new beginnings.

28 May 2020  |  Written by :

Denis Brisebois is a management consulting expert and leader in tourism, leisure and culture....

See the profile

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As the lockdown is being lifted, businesses are gradually reopening. Until then, let’s take a look at some questions that have come up about temporary foreign workers.

Here are answers about frequently asked questions for organizations that have hired temporary foreign workers (TFWs) or planned on hiring TFWs.

I hired a TFW before the crisis and he’s still in his home country. What can I do until he arrives in Canada?

First off, contact your future employee as soon as possible to make sure they still plan on coming to Canada. If that’s the case, reassure them that the job they were hired for will still be available when they get here.

If possible, set a potential arrival date and coordinate travel logistics between his home country and Canada. You can also request to extend the Labour Market Impact Assessment (LMIA) to give your employee more time to travel to Canada.

The goal is to maintain trust with your TFW and guarantee that they will be available when you need them.

I temporarily laid off TFWs who were working for me. What can I do to help them until business reopens?

Once again, communication is key. Keep in touch with your employees and keep them informed of your plans to eventually reopen. Since the borders are closed, your TFWs cannot return to their home country and they must continue to cover their needs during the unemployment period.

Let them know they’re eligible for the Canada Emergency Response Benefit (CERB) and refer them to the website where they can submit their applications. This will ensure that your TFWs can cover their needs during the crisis and remain available when business resumes.

I want to rehire my TFWs after the crisis. How can I make sure they’re legally allowed to stay in Canada until then?

As mentioned above, your TFWs should stay in Canada during the unemployment period. So, they must maintain a legal status throughout their stay. If their work permit is about to expire, you have two options:

  • You can apply for a work permit extension for employees;
  • You can change their status to a visitor status.

In all cases, your TFWs must have a valid permit allowing them to stay in Canada.

I want to withdraw the job offer for which I had hired a TFW before they arrived in Canada. What’s the process?

Inform the TFW as soon as possible so they can make the necessary arrangements. Contact Immigration, Refugees and Citizenship Canada (IRCC) and the Ministère de l’Immigration, de la Francisation et de l’Intégration (MIFI) to withdraw their work permit application.

In certain cases, if the work permit application hasn’t been processed, you could be eligible for a processing fee refund. Lastly, inform Employment and Social Development Canada (ESDC) to have your LMIA application withdrawn.

Be proactive and establish clear and open communication with your TFWs. That way, you’re making sure your employees are informed of your decision and are available to come back to work as soon as possible, if needed.

Regardless of your situation, we recommend that you speak with an immigration expert who can help you make the right decisions and guide you throughout the process.