The 30 June reporting season has arrived as it always does, and promises to be unlike any reporting season we have previously experienced.

COVID-19 presents unique challenges for businesses, and while its impact is pervasive, the effects of the pandemic will differ across sectors, geographic locations and individual entities.

Against the backdrop of COVID-19, preparing financial statements will not be a generic exercise. Information regarding an entity’s historical performance is always valuable, but information about an entity’s future prospects, the risks it faces, and its strategy will become more important than ever in the current environment.

Users of financial reports will want to understand the entity’s unique COVID-19 story, including the good, the bad and the ugly. Of interest to users will be how the pandemic has impacted the entity specifically, the challenges the entity is facing, and the potential consequences under various possible scenarios that may eventuate.

To meet the expectations of users, preparers will have to rise to the occasion and produce disclosures in financial reports that are tailored, transparent and timely.

This will probably require more work effort (and thus more time) from those involved in the reporting process, which is especially a problem when finance teams are already tightly resourced. Early planning and engagement with directors, audit committees and auditors will go some way in alleviating some of the pressure. It will also be important to know what the most significant matters are (for example, liquidity, solvency and operational issues) and focus on these in the immediate term.

Directors, management and preparers should bear in mind the areas that the Australian Securities and Investments Commission (ASIC) have highlighted as being its focus areas for 30 June 2020. Unsurprisingly, one such focus area relates to disclosures in financial statements. Furthermore, a number of the questions included in ASIC’s financial reporting FAQs on its website are dedicated to disclosures in a COVID-19 environment. Both these resources should be referred to and applied by directors and others involved in the reporting process.

Another useful guide that was recently published is the report titled Impacts of COVID-19 on annual report disclosures. This report was the result of a joint effort by the Australian Institute of Company Directors (AICD), Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia. The guide aims to help directors and preparers navigate the key considerations when assessing how best to disclose the effects of the pandemic in their financial reports. It is relevant for all types of entities, both listed and unlisted, for-profit and not-for-profit.

While the next few months will not be plain sailing, finance teams and directors are encouraged to dedicate sufficient time and adequate resources to the financial reporting process. Careful attention should be given to those material areas of the balance sheet that are most impacted by the increased uncertainty due to COVID-19. The narrative included in financial reports should be entity-specific, consistent and clear, and include forward-looking disclosures.

As always, your HLB adviser is here to assist you in these bewildering times. Don’t forget, we really are all in this together.