Financial Reporting: COVID-19 Impact, Ratio Analysis & Funding Methods

This report examines the impact of COVID-19 on finance and financial reporting, emphasizing the changes in accounting practices and financial regulations. It discusses the challenges in financial reporting during the pandemic, including the measurement of assets and liabilities, the application of fair...Read More

FINANCE AND FINANCIAL
REPORTING

TABLE OF CONTENTS
SECTION A.....................................................................................................................................3
SECTION B.....................................................................................................................................5
Question B3.................................................................................................................................5
Question B4.................................................................................................................................6
REFERENCES................................................................................................................................8

SECTION A
COVID19 is one of the adverse situation that has highly affected the processing of the
company. There are several factors that are changed due to the prevailing of this Pandemic
situation. In order to become successful and effective there are several actions that are required
to be taken into consideration by organization so that higher profitability & sustainability can be
derived. Accounting and finance is one of the crucial department of the business that play role of
governing and managing the financial resource used to carry forward the operational activities.
There are few rules and regulations imposed by authorities for different sector sin turn higher
level of effective processing can become possible.
The pandemic situation has resulted into distinct kind of change such as temporary
closure, diversification, personnel changes, application of distinct organizational practices. The
main reason behind applying such curse of action is to obtain the ability to coordinate with
prevailing circumstances. There are certain laws and legislation which are needed to adhered by
firm so that higher extent of competitiveness can be derived (Valaskova, Kliestik and Kovacova,
2018). In order to coordinate with prevailing regulations there is requirement to get the
information regarding such component that can hinder or boost the organizational performance.
For getting the positive impact on the processing of company there is need to apply course of
action which can make company able to avoid legal obligations. From the evaluation it can be
specified that providing the crucial information to the different stakeholders is one of the part of
determining success. The main fact underlying this is that there are several people who make the
decision on the basis of provided information by the organization.
In order to meet this requirement of stakeholders company need to strictly adhere to the
accounting & financial reporting standards. COVID19 has significantly impacted th on the
global financial market and have altered few accounting implications. Entities are experiencing
condition often associated with general economic growth. Regulating the financial market is
considered to be crucial for the organization as it is considered to be highly volatile & erosion. In
addition to this, it has lead to firm to face few complications in key accounting & disclosure and
applying of IFRS standards in preparation of the financial statements. The one of the crucial
change that is required to be followed by firms post COVID is h implication of measurement of
assets and liabilities so that going concern concept can be met. In the pandemic period it has
become difficult for the organization to formulate financial reporting and internal audit activities

so that meeting with requirements of accounting concept can become possible (He and et.al.,
2020.). There are several processing of the company like preparing budget, formulating the
financial reporting, etc so that complying with the rule and regulations imposed for providing the
transparency and effectiveness sin decision-making process can become possible.
There are few measurement issues that has been identified in the preparing of financial
statement w for which the change s that are required to be taken into practice. The factors that
are needed to b highlighted is implementation of accounting concept of fair value so that
volatility of market can be taken into consideration. For gaining capabilities to overcome the
measurement issue in the COVID19 time much emphasis is given on having on recording the
fair value so that higher materiality in statement can be provided. The another issue that has been
n identified in the processing of commercial activities in the time of COVIDis revenue
recognition. In order to achieve corrective insights regrading this IAS has been applied to
understand which components are crucial or not. For example- the reduced demand can increase
additional price concessions, expected returns, reduced volume discounts, etc which can lead the
firm towards complication of paying penalties. IFRS 15 revenue helps in gaining the information
in which estimation calculation of the variable cost has been provided.
Management of the organization required to focus on having relevant information
regrading the ability that company can operate in continuity or not. Government has highly given
emphasis on this aspect as there are number of complications which ha shut down the processing
of the company (Chanias, Myers and Hess, 2019.). For this purpose according to the IAS there
should be proper disclosure of the information by paying attention n the material uncertainties
that can doubt upon the ability to operate as going concern. Full disclosure is one of the crucial
accounting concept that helps the users to understand all the depth details regarding the
company's processing such as past, present and future events, it provides assistance in gaining
data regrading the financial and non monetary positioning of enterprise. The COVID19 has been
one of major issue that has created hurdle for the organization which are needed to highlighted
by the organization in turn eliminating such aspects that can lad to result in non crucial legal
proceedings. The financial risk has inclined in due the pandemic which is majorly pointed in
changes occurred in the accounting & financial requirement. It is important for the organization
to pay attention on this aspects so that higher better knowledge to clients can be given.

According to the IAS there is need to disclose all the crucial financial information by involving
all the sub totals so that having relevant and reliable information can become possible.
On the basis of the provided information regarding the prevailing changes in the
accounting concept it can be specified that COVID19 has lead to several modifications. It is
highly important for the organization to consider all these rules and regulations o that managing
and controlling the overall processing of company in effective manner can become possible.
There is need to emphasis on these recordings, analyzing and interpreting of information in
accurate and reliable manner in turn gaining competitive edge can become possible. It can help
in understanding accurate performance of company by applying this relevant changes into the
mentioned pattern.
SECTION B
Question B3
Ratio analysis is one of the best quantitative method with the help of which company and
its users can analyse and interpret-ate its performance of the company. Thus, it is always
advisable to the company that they must adopt the ratio analysis tool of management accounting
within their business.
Basis of Ratio Analysis:
The base of ratio analysis is basically financial statement of the company which include
income statement and balance sheet.
1. Income Statement: The income statement is basically indicated the profit earned and
loss incur by the company. The income statement cover the list of income earned and
expenses incur by the company which is recorded using the accrual concept of
accounting.
2. Balance Sheet: The balance sheet cover the list of assets, liabilities and equities which
should be balanced at the end of the year. While preparing financial statement, the
company have to record the transactions using double entry system. Along with this, it is
also advisable to the company that they follow the accounting equation concept which is
Assets = Equities + Liabilities (Vickerman, 2017).
Rationale of Ratio analysis.
The various importance of ratio analysis within the business are as follows:

 It is important for the future planning and forecasting of the business as ration analysis
helps in identifying the present performance.
 It is also plays crucial role in comparing the present performance of business with that of
the past performance or its competitors.
 It also analyses the operational efficiencies of the firms using the collection period,
payment period and the turnover ratio.
 Also, with the help of ratio analysis company and users can identify and analyse the
profitability and liquidity of company such as gross margin, net margin, current ratio,
quick ratio etc. (Vickerman, 2017).
 Beside this, the ratio analysis also plays significant role in the identification of business
risks such as risk of losing the control of the firm.
 It is also important for the company to analyse the growth of the business.
For example, if the current ratio of company A is 2 and the current ratio of company B is
1.5 then this means that liquidity position of the business A is higher and better than the liquidity
position of company B. In order to further improve it is advisable to the company that they have
to allow discount to the customers who pay the company dues early (Vickerman, 2017).
Question B4
Some potential and popular methods of raising finance for an organization are as follows:
1. Public issue of shares: The organization can raise their finance by issuing shares
that can be equity shares or preference shares. The equity shares are most
preferred by the public as compare to the preference shares (Yang, 2021). The
person taking shares from the company requires lots of formalities and also
requires the approval of SEBI. The company can issue the shares at public at a
large in order to raise their funds in the organization.
2. Issue of debentures: The company used to collect the long-term debts by issuing
the debentures. This is also called the borrowed capital which makes the company
to increase its finance. The debentures can be convertible or non-convertible and
redeemable or irredeemable (Akter, Himo and Siddik, 2019). The convertible
debentures are the most issued debentures by the organization. Its is a type of
bond or the debt instrument which is unsecured by collateral. The governments

and organizations used to issue the debentures in order to raise the finance in their
business.
3. Term loan: The term loan provides borrowers with the total amount of cash in
order to exchange for the borrowings. The borrowers that is the organization used
to pay the lenders the fixed amount of over the given payment with including the
interest (Sadalia, Rahamani and Muda, 2017). By this method the organization
can increase their capital and finance and can have the good profit in the
company. The loan can be given for short-term, intermediate term loan and long-
term loan. The interest rates are depends on the amount and time of the loan taken
by the company.
4. Partners and Venture capital: Partners for the business can be concluded as the
best source of raising the fund in the company. The organization can do
partnership with the other firm in order to raise their capital and also to increase
their profitability. The partners of the organization has an option to become na
employee of the business. On the other hand, venture capitalist are the
organization s which used to provide funding to the organizations at their initial
stage.
5. Working-capital loan: this type of loan is mostly taken by the small business in
order to meet their short-term liquid cash. When the organization required urgent
cash they used to take the working-capital loan in order to meet their liability.

REFERENCES
Books and Journals
Akter, A., Himo, R. H. and Siddik, A. B., 2019. Corporate Bond Market: The Case of
Bangladesh. World Rev. Bus. Res. 9. pp.20-38.
Chanias, S., Myers, M. D. and Hess, T., 2019. Digital transformation strategy making in pre-
digital organizations: The case of a financial services provider. The Journal of Strategic
Information Systems. 28(1). pp.17-33.
He, P. and et.al., 2020. Accounting index of COVID-19 impact on Chinese industries: A case
study using big data portrait analysis. Emerging Markets Finance and Trade. 56(10).
pp.2332-2349.
Sadalia, I., Rahamani, N. A. B. and Muda, I., 2017. The significance of internet based financial
information disclosure on corporates’ shares in Indonesia. International Journal of
Economic Research. 14(12). pp.337-346.
Valaskova, K., Kliestik, T. and Kovacova, M., 2018. Management of financial risks in Slovak
enterprises using regression analysis. Oeconomia Copernicana. 9(1). pp.105-121.
Vickerman, R., 2017. Beyond cost-benefit analysis: The search for a comprehensive evaluation
of transport investment. Research in Transportation Economics. 63. pp.5-12.
Yang, T., 2021. On the Comparison and Choice of Fund-Raising Methods of
Enterprises. Industrial Engineering and Innovation Management. 4(2). pp.12-17.