The rapid spread of the COVID-19 coronavirus outbreak around the world has become a global pandemic since March 11, forcing many governments, including Spain, to take exceptional restrictive measures and drastically reduce activity to contain the spread.
This situation is significantly affecting the global economy due to the interruption or slowdown of supply chains and the significant increase in economic uncertainty, evidenced by an increase in asset price volatility, exchange rates and a decrease in long-term interest rates.
To mitigate the economic impacts of this crisis, on Wednesday, March 18, Royal Decree-Law 8/2020, of March 17, of extraordinary urgent measures to face the economic and social impact of COVID-19 was published.
Faced with this atypical and exceptional situation, it is necessary for administrators in general, and the financial-accounting management of companies in particular, to be aware of the news that may affect their activity and to act proactively to address the risks and impacts on companies. different accounting areas. To do this, in this article we identify the most relevant measures that, in commercial matters, the aforementioned RD on urgent measures has included, and other useful considerations on the annual accounts formulated under International Financial Reporting Standards (IFRS) and General Accounting Plan ( PGC).
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In relation to the formulation of the annual accounts or financial statements for the years ended December 31, 2019, the consequences derived from COVID-19 are considered a non-adjustable subsequent event, since they reveal conditions that did not exist at the end of the exercise. However, it must be considered that the World Health Organization declared COVID-19 as a global health emergency on January 31, 2020. Therefore, for the annual accounts or financial statements of the financial years closed from the end of February 2020, this is an adjustable back event.
For these purposes, in accordance with accounting legislation, when subsequent events that do not require adjustment of the annual accounts are of such importance that failure to provide information in this regard could distort the assessment capacity of the users of the annual accounts, It must include information regarding its nature and an estimate of its effect or, where appropriate, a statement about the impossibility of making such estimate. Click here for medical practice accounting
Companies in general are going to be affected by liquidity tensions and unexpected losses that can lead to problems of commercial or financial solvency.
In this sense, it must be considered that, although the subsequent event does not require adjustment of the annual accounts or financial statements, if as a consequence of it the going concern principle cannot continue to be applied, the annual accounts must be formulated under the principles settlement. In accordance with Spanish accounting legislation, this requirement extends even after the date of formulation and up to the date of approval of the annual accounts.
Royal Decree-Law 8/2020, through articles 40 to 43, has incorporated flexibility measures on certain commercial obligations while the state of alarm lasts.
Among others, the following measures have been adopted:
The way in which the meetings of the governing and administrative bodies and the adoption of resolutions can be held is made more flexible;
The term to exercise the right of separation of the partner is suspended;
The term for the call by the administrative body of the general meeting of partners to adopt the resolution of dissolution of the company is suspended and if the legal or statutory cause of dissolution had occurred before or during the validity of the state of alarm, the administrators They will not be liable for the social debts contracted in that period;
The expiration period of the registry entries is suspended during the validity of the royal decree; and
The term of the bankruptcy application duty is suspended.
As a relevant aspect, the period of three months from the close of the fiscal year for the governing body or administration to formulate the annual, ordinary or abbreviated, individual or consolidated accounts, and, if legally required, the management report, and to formulate the other documents that are legally mandatory, it is suspended until the state of alarm ends, resuming again for another three months from that date.
In the event that, on the date of the declaration of the state of alarm, the accounts for the previous year had already been formulated, the deadline for the accounting verification