The world is currently facing rapid changes related to the spread of the new coronavirus (covid - 19). Countries around the world, including Saudi Arabia, are taking precautionary and preventive measures to reduce the spread of the virus and mitigate its effects. One of the most important precautionary measures taken is limiting face-to-face contact with others as much as possible, including pausing meetings and mixing in workplaces and shopping. Such measures might even nessicates imoisng a full curfew. Although these measures are important, they have had an impact on the business environment and GDP. In return, the Kingdom has put in place packages of decisions and measures to mitigate the economic consequences of these procedures to help the business sector overcome the pandemic with minimal harm.
Since, in such circumstances, explanations regarding potential effects on financial reportings might vary. Therefore, SOCPA would like to assure that Saudi Arabian financial reportings's international standards are based on principles which requires the administration to work diligently to implement the standards requirements needed, including continuity of property. in this context, IAS number (1) states that when preparing financial statements, management must assess the viability of an enterprise as a continuing enterprise. The enterprise must prepare the financial statements on continuing basis as long as there is no intention of liquidating the enterprise by the management, or there is no realistic alternation other than to so. If managemnt, while conducting assessment, becomes aware of cases of material uncertainties related to events or circumstances that may raise significant doubts about the viability of the enterprise as a continuing enterprise, It must disclose such uncertainties. When an enterprise does not prepare financial statements on a continuing basis, it must disclose that fact, as well as the basis on which the financial statements were prepared. It must also diclose the reason why the enterprise is not a continuing enterprise. The management is also required to present the same standard when assessing whether the assumption of continuity is appropriate or not. It must take into account at least all information available in the next twelve months from the end of the reporting period. However, The consideration of such information depends on the facts of each case. For example, when the enterprise records consist of profitable operations, and its financial resources can be accessed easily, the enterprise may reach the conclusion that accounting on a continuity basis is appropriate without conducting thorough analysis. In other cases, management might need to take into account a wide range of factors related to current and projected profitability, debt repayment schedules and possible sources of alternative financing before being certain that the basis for continuity is appropriate. In the case of potential effects of coronavirus, management must take future information for the next following twelve months at least for reporting period, whether related to the negative effects of the virus on the functioning of the business or the ability to pay debts, or related to the positive effects of the package of facilities and support provided by the state to businesses affected by the spread of the virus. It should also be emphasized that an entity must assess the appropriateness of the preparation of financial statements on the basis of continuity in the period after the date of the end of the financial year and before the publication of its financial statements.the requirements of IAS 10 on the preparation of financial statements must be applied during the emergence of indicators that prevent the entity from assuming business continuity after the date of the end of the financial year and before the publication of the financial statements.
In addition, although these developments may have implications for the entity's sustainability, future financial results, cash flows and financial position, they may not currently be able to be accurately determined as there is insufficient information to predict them as at the date of preparation of the financial statements, the company must disclose to the extent that such information is available.
In term of The international Financial Reporting Standards adopted in the kingdom are based on principles as mentioned before, each entity must assess the effects according to its own circumstances, and it is not possible to make a general assessment of all entities due to different financing structures, the nature of business and varying negative impact of the virus or the positive impact of the government support provided to affected entities.
Dr. Ahmed bin Abdullah Al-Meghames
Secretary-General of SOCPA