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3 March 2020

Should coronavirus be accounted for as an adjusting or non-adjusting event?

The IATA Industry Accounting Working Group (IAWG) would like to call attention to an issue impacting year-end financial reporting. The issue is whether the coronavirus impact is an adjusting or non-adjusting event.

IAS 10 defines an adjusting event as an event that provides evidence of conditions that existed at the reporting date. A non-adjusting event indicates conditions that arose after the reporting date.

It is widely accepted that on December 31, 2019 a limited number of cases of an unknown virus had been reported to the World Health Organization. There was no explicit evidence of human-to-human transmission at that date. The subsequent spread of the virus and its identification as a new coronavirus does not provide additional evidence about the situation at December 31, 2019 and is therefore a non-adjusting event.

While non-adjusting, events after the reporting date sometimes provide additional information about the uncertainties that existed at the reporting date and they may impact financial reporting issues including:

  • Going concern
  • Fair value measurement
  • Expected credit loss assessment
  • Assets impairment
  • Other financial statement disclosure requirements
  • Other accounting estimates

Several publications by international accounting firms have been published that provide additional guidance in relation to the impact of the coronavirus on financial reporting. They are available from their websites following the links provided below:

PwC - Accounting implications of coronavirus: PwC In brief INT2020-04

EY - Applying IFRS - Accounting considerations of the coronavirus outbreak

KPMG - Potential impacts of coronavirus on SEC issuers

The International Air Transport Association (IATA) does not represent or warrant that the assessments and information contained in these notes are complete or free from errors and does not assume, and expressly disclaim, any liability to any person(s) or entities for any loss or damage caused by errors or omissions in these notes or misinterpretation of the contents hereof. Furthermore, IATA expressly disclaims any and all liability to any person or entity in respect of anything done or omitted, and the consequences of anything done or omitted, by any such person or entity in reliance on the contents of these notes.

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