ACC302 Accounting Theory and Corporate Governance Trimester 2, 2020 Due Date: Part 1 – Week 6 Value: Part 1 – 7% Part 2 – 8% Length: Referencing: Group: Email format: Part 1 – 1200 Words Harvard...

1. Impact of Covid- 19 on accounting:
Impairment cost:
Covid- 19 has impacted the impairment cost in significant manner and the impairment cost for the companies has been increased significantly. Due to uncertainty of Covid-19 normal scenarios, the cash flows of assets are impacted significantly. Due to uncertainty of period and severity of pandemic, the entities need to carefully analyse and take informed judgements regarding impairment testing. Due to pandemic, the cash flow forecasts, discounting rates etc, used to determine the value in use will be changed significantly and the value of impairment loss will be increased to great extent (Deloitte, 2020). Due to reduction of forecasted cash flows the value in use will be reduced and by comparing the ca
ying value with value in use, the impairment loss amount will be increased significantly. Under the present scenarios, various accounting bodies have issued guidance on impairment testing under COVID-19 situation and each entity need to access impairment testing for non- cu
ent assets. Due to pandemic, the impairment indicators are existing, such as deterioration in market economic conditions in which entity operates, idling of assets due to discontinue or restructuring of business operations etc. which can be resulted in impairment of assets as CGU significantly. Further the earnings of the entity are also likely to be impacted because of lower sales, idling costs, and increased operating expenses. The COVID has also resulted in delay of operational activities of organization which have impacted cash flows in negative manner and the impairment costs are expected to be increased significantly.
Impact of Covid- 19 on dividends:
The pandemic has impacted the dividend policies of the companies across the globe in negative manner. Many of the companies have cancelled the dividend which was declared by them earlier before pandemic situation. Some of the companies have defe
ed their dividend payment due to cash flow crisis. Some of the companies have reduced the dividend pay- out rates as compared to previous year trends. Many of the companies are facing cash flow crisis and due to this the companies are unable to pay dividend and due to reduction or no dividend the stock prices of the company has also declined significantly. The earnings of the companies have declined during pandemic situation due to which the reserves of the companies have been reduced and the companies are unable to recommend the dividend in absence of profitability. The pandemic has also impacted the economic growth of the companies and there are various macro...