Questions of Doubt Concerning the (Tax) Accounting Implications of the Coronavirus

Here are some answers for Germany (but be aware that other solutions may apply in other countries):

Referring to the impairment of depreciable fixed assets, a depreciation obligation only exists in case of expected permanent impairment. This is the case if the value on the balance sheet date is below the scheduled amortised residual book value for more than half of the remaining useful life or at least five years.

When it comes to the valuation of inventories, no inclusion of idle capacity costs (overheads during production stoppages) are allowed in the cost of production.

It has to be checked whether provisions for impending losses must be formed if promised deliveries/ services cannot be made (e.g. due to own production standstill or at the supplier’s premises). Unscheduled write-downs to the residual book value of goodwill are to be made at the latest from the balance sheet date 31 March 2020 (but not on 31 December 2019), if future profit value is permanently lost due the pandemic.

Explanations must be included in the notes to the financial statements only if the company is affected by COVID-19 and this has an impact on future development, e.g. if there are risks that could jeopardise the company’s continued existence.

In the risk report of the management report, a reporting obligation generally exists if possible future developments could lead to negative deviations from forecasts or targets of the company. If the pandemic led to a significant individual risk and otherwise no accurate picture of the group’s risk situation is conveyed, in particular, risks to the continued existence of the company as a going concern must be reported. In the forecast report, companies need to make comparative forecasts or to present them in various forms in the event of special circumstances like the coronavirus (i.e. “unusually high uncertainty”); a complete waiver of the forecast reporting is not permitted.

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