As each week progresses, I am starting to see more companies that are having to report COVID-19 affected trading periods as their year-end passes by. With this in mind, we are having to look at how the application of accounting principles are changing the face of the accounts. The principles applied can have a huge impact on how clients’ accounts are read and understood by stakeholders, such as lenders, suppliers, and customers. I believe that now more than ever no stakeholder will enter a new contract without first downloading the accounts from Companies House and making their own performance risk assessment. It is easy to overlook the accounting policies and disclosures that represent the story behind the numbers. These can provide a clearer picture and indeed some comfort. Personally, I would be highly sceptical of any set of accounts I saw now that did not mention COVID-19 and its impact.

It is hard to accept that a company with a pre-lockdown balance sheet date will be operating under a different set of rules compared to one with a post-lockdown date. It is quite possible that two identical set of trading periods will look very different, purely due to the application of financial standards and whether any event pre- or post-balance sheet was as a direct result of the pandemic.

As an example, take bad debt provisions. Whether you can claim bad debt relief is not as straight forward as establishing whether any debts are now settled, but also, why weren’t they able to be paid, will they ever be paid and when is the company year-end.

I hear lots of talk about changing year-ends and extension to filing deadlines, but the reality is there is no “one size fits all” route to go down. To find the best approach for each of our clients, we must have detailed discussions about what the accounts might look like in various scenarios and particularly considering areas such as:

  • Breaches or covenants
  • Restructure costs
  • Going concern
  • Stock valuations
  • Property valuations
  • Debtor recoverability
  • Loss making contracts/ penalties for breaking contracts
  • Renegotiated leases or temporary rent reductions
  • Government grants, CBILS, BBLS, Job Retention Scheme

If you are unsure or concerned about any of the above and need clarity on the next best step for your business, we can help create the right strategy for you with regards to accounting policies and disclosures. For more information, get in touch with your usual Campbell Dallas contact.


The information in this article should not be regarded as financial advice. This is based on our understanding on 24 July 2020. Laws and tax rules may change in the future.