The recent outbreak of the conflict between Russia and Ukraine has caused some uncertainty and possibly panic in the world today, once again. The world economy is taking quite a knock with energy and commodity prices increasing significantly. These significant price increases are diminishing the sprouting post-COVID-19 economic recovery which the world has been awaiting.
Along with the economic impact being experienced, there are some accounting impacts that must be taken into account when preparing IFRS/ IFRS for SME financial statements.
Some key areas to take under consideration include:
- IAS 10 Events after the Reporting Period (SME Section 32) - Adjusting or non-adjusting events depending on an entity’s year end.
- IAS 36 Impairment of Assets (SME Section 27) – impact on the impairment calculation inputs, including growth rates, discount rates, etc.
- IFRS 9 Financial Instruments – impact on the calculation of expected credit allowance (For IFRS for SMEs this will impact Section 11 in considering whether there are incurred credit losses at year-end) which may increase due to economic pressures as a result of hikes in fuel and food prices.
- IFRS 13 Fair Value Measurement – Fair value hierarchy changes to inputs (For IFRS for SMEs this will also impact Section 11 in consideration of the fair value of financial instruments as well as other fair value assessments where applied).
Watch this space for more information as developments in this conflict are known.