Outlook on world economies affected by the pandemic
The global scenario has undergone a quick sea change since the SARS-CoV-2 virus was first identified in December 2019. The pandemic has become the numero uno reason for the decline in economies across the globe, resulting in rising in unemployment, the decline in Automobile & Auto parts, Aviation, tourism, hospitality industries, etc. to name a few. There has been a silver lining to this adversary for a few industries like online business models, subscription economies, Healthcare, pharmaceuticals, and packaging industries, etc. While all this is happening in the background, one of the primarily impacted areas in Organizations is Financial reporting which is undergoing changes to support such disruptive situations.
Key changes to financial Reporting
The recent amendments to IFRS and additional disclosures in financial statements associated with this changing environment have been a mounting concern to Organizations. Following is the broad list of additional disclosures to be incorporated in financial statements:
Going concern - Material uncertainties, challenges, and judgment used in going concern assessment, availability of sufficient cash & credit facility for continuing business, risks related to entity's business
Income taxes - Changes to tax rates owning to the pandemic, amount and expiration date for carrying forward of losses, evidence to support recognition of deferred tax asset when entity incurred losses
Insurance contracts - Assumptions used in making estimates, the concentration of risks including the effect on market & credit risks
Lease modifications - Material concessions, impairment of assets to be considered for a reduction in lease receivables, criteria that meet the practical expedient for rent concessions, nature & analysis of contracts to which concession applied rent concessions to be disclosed in P&L
Revenue recognition - Additional disclosures for performance obligations, changes to payment terms, changes to the contract, and significant judgments used in determining the same
Employee benefits - Termination of employee's details in which exit or disposal activity is initiated, the funded status of defined benefit plans
Restructuring - Reconciliation of each class of provision, a brief description of the provision
Government grants - Accounting policies adopted, nature & extent of grant, any contingencies in case of unfulfilled conditions attached to grants
Impairment of non-financial asset - Key assumptions and judgments in estimating recoverable amount, include sensitivity analysis, certain costs incurred owing to the pandemic should be expensed and excluded from the cost of inventory
Financial instruments - Reasonable estimates based on available sources, liquidity risk owing to the pandemic, banks should disclose exposure by region/sector, disclose entity's ability to distribute dividends
Oracle ERP’s capabilities
Oracle ERP seamlessly handles the pandemic-led financial reporting and disclosure requirements. The product offerings from Oracle cater to the following end-to-end processes which are impacted by IFRS changes.
a. Record to Report
b. Quote to Order Cash
c. Procure to Pay
The below chart shows the Oracle SaaS products and offerings that enable customers to perform effective IFRS Reporting in line with the changes that have been brought in post COVID-19.
Blog Image: TCS’s viewpoint on challenges introduced by COVID-19 in IFRS Reporting and its mapping to solutions (Indicative)
What’s Ahead for the Future
It’s time for Organizations to make a choice to move into the cloud space. TCS has been helping customers successfully traverse this challenging journey by bringing in their flagship offering - Crystallus™ for Oracle SaaS coupled with Industry-specific last-mile solutions (pre-built) to address such requirements upfront in the transformation journey. Crystallus™ for Oracle SaaS provides a jumpstart kit along with the pre-configured instance which reduces the overall timeframe of the transformation journey and helps deliver the business values to customers. With the strength of Oracle SaaS and TCS’ domain knowledge and Finance Expertise, Customers are benefitted by the End-to-End Value chain proposition that they bring to the table. Such a holistic view gives customers the confidence to partner and excels even during challenging times. Right from conceptualization to implementation, these frameworks prove to be a one-stop solution for equipping Organizations to overcome any barriers and reach new heights.
Article Guest Authors:
Prasanna Krishnan Venkatesa, Chief Innovation Office, TCS
Rahena Damodaran, Associate Consultant, TCS
Vidya Balasubramanian, Associate Consultant, TCS