Various sectors were affected by the Covid-19 pandemic having regard of its direct effects on the weight of the fixed costs of companies operating in these sectors in relation to their turnover and this, due to the decrease or the cessation of their activities.
The Covid-19 pandemic affects and continues to negatively impact the own funds of these companies as shown in their summary statements. The last-mentioned may not reflect the real and fair view of the financial assets situation and the results of these undertakings, if an appropriate accounting framework is not in place to adapt the accounting treatment of certain transactions to the current context, which is unprecedented and exceptional.
In this setting and given that the pandemic which impacted the financial year 2020 extended to 2021, the Economic Monitoring Committee referred the matter to the National Accounting Council (NAC), on February 4th 2021, in order to extend the application of the provisions of NAC opinion n ° 13 explaining the accounting implications of the Covid-19 pandemic to the fiscal year 2021 and to all subsequent fiscal years that may be affected by the state of health emergency decreed by the Government.
In this reason and in accordance with the provisions of Law N° 42.20 amending Decree-Law N°2.20.292, of March23rd 2020, concerning the provisions relating to the state of health emergency and the procedures for its declaration and Decree N° 2-21-132, of March 5th 2021, extending the period of validity of the state of health emergency throughout the national territory to deal with the spread of the Virus, it has been waived the normal procedure relating to the adoption of the NAC opinions provided for by Decree No. 2.88.19 establishing this Council.
Thus, the NAC issued, on March 22nd 2021, the notice N° 14 which is supplementing the previous notice N°13, explaining the accounting implications of the Covid-19 pandemic. This opinion, drawn up in consultation with the Order of Chartered Accountants and was examined by the NAC Permanent Committee meeting held on March 10th 2021.
The notice N° 14 relates in particular to:
- The methods for evaluating and accounting for the expenses and losses specifically linked to the pandemic, in this case, the contributions paid by entities aimed at combating the effects of the Covid-19 pandemic as well as the proportion of fixed costs linked to the sub-activity compared to the normal production or operating capacity of the affected entities.
- The revision of the depreciation plans for tangible fixed assets when the conditions and/or the periods of use of certain fixed assets are notably impacted by the circumstances linked to this pandemic.
The Notice is applicable to fiscal years beginning in 2020 and 2021 and all subsequent fiscal years that would be potentially affected by a health emergency as a result of the Covid-19 pandemic.