Applicability Of The Accounting Principle Of Business In Progress In Times Of Covid-19

Applicability of the accounting principle of business in progress in times of COVID-19

Introduction

With a surprising way a new infection has caught the attention of all the settlers to be alert, according to the reports of the World Health Organization (WHO), it reports that a new outbreak has reached the present of which they point to it as they point to it asA viral infectious disease caused by the SARS-COV-2 virus, popularized as COVI-19, in which it emerged as for the first time in a state called Wuhan (China) on December 31, 2019 reports the first cases caused by this diseaseof which it was unknown, on January 11, 2020 the World Health Organization announces the first death caused by this new virus. And so it extended from person in person until they reached many states.

In response to this, on June 23, 2020, an alliance between the International Olympic Committee, the World Health Organization and the United Nations Organization, providing an isolation to not continue spreading this disease and reduce the population, in the population, in the population, in the populationwhich is something significant since it has brought great consequences over a long time significantly affecting the markets globally, the companies, of which the world economy has not been beneficiary since a money entry is not being generatedMinimum in companies by powerful viruse.

 In accordance with this, the figures are beginning to be reflected in companies because of the impact of the pandemic, many companies in the sector are currently obliged to close or suspend their activity, causing a large number of unemployed people, in which theNational Association of Financial Institutions, who show that the indicators for the Colombian local economy tend to lower consumption with greater unemployment.

Developing

This development of this writing is an argumentative narrative of a narrative nature in which it is noted that the country’s economy has not had a good performance because of the pandemic in which organizations have had to adapt certain conditions not to stop in the operabilitybusiness of which companies have managed to live in this pandemic that for her is something difficult since this situation was not expected because of COV-19. 

The Covid-19 epidemic was declared by WHO an emergency public health emergency on January 30, 2020, the pandemic characterization means that the epidemic has spread through several countries, continents or the whole world, which hasArrived at the suspension of the functions of many small and medium industries affecting a large number of people without employment, since many entities achieve strategies to sell something in the middle of the pandemic of the Coronavirus in which they cannot be exposed to society canaffect entities in almost all economic sectors since it is an infectious virus that is transmitted in person to person.

Therefore, a review in the financial statements to companies is applied to evaluate their behavior in crisis time, international financial information standards, based on what is described in the accounting principle of the organizations underway, especially according toThe most recent criteria collected in the conceptual framework (IFRS Fundation, 2018). From the accounting perspective there is a principle called "hypothesis of the business in progress" that the managers of the companies must ensure that it is fulfilled and that it is reflected in the financial statements by mandate of the International Accounting Standards (NIC) and the international standards ofFinancial information (IFRS).

According to the IFRS proposed documents for SMEs in the cause of pandemics we can find the definition of business in progress, which we place in the conceptual framework of the Full IFRS and in section 3.8 (presentation of financial statements). The business in progress this reference within the IFRS in which an entity is in operation and can continue to operate its activity within the predictable future, which therefore the organization does not intend or the need to liquidate its commercial activity.

 According to the contribution of Luis Wilson Morales Montero October 29, 2020 under IFRS, for the fulfillment of the business hypothesis, the entity’s administration is not planning to liquidate it or cease its operations definitively, while in the code ofCommerce one of the causes of liquidation is the reduction of assets below 50% of the capital.

In the case, when an entity cannot remain in operation, that is, operating in a certain time the financial statements must be prepared on a different accounting basis, that is, by the net liquidation value according to Helmut Sy Corvo. The general purpose financial statements are prepared on the basis of a business ongo.

In addition, of the terms for the cause of dissolution in the Commercial Code thus on the financial impact according to the IFRS based on the pandemic in the financial instrument sections in the IFRS 9 we will have effects by the Coronavirus which detailed that modifications to thefinancial assets and liabilities (for example, concessions at terms of payment);Decrease in the effectiveness of coverage or disqualification of the continuation of the coverage accounting due to the planned transactions is no longer probable. Based according to the contributions due to COVI-19.

Next we will show an image where you can see the illustrations that companies have to put into operation and in motion their commercial activity and their business operation, for the execution of them framed in the operational – financial cycle since they are the most importantIn an organization.

According to the relationship of the operational and financial cycle of the companies, it is the constant movement that companies have days to obtain cash that is known to produce cash that becomes one of the required and expected financial consequences appreciatedIn the cycle with the cash output that activates the operability of business, when applying their activities are different as for commercials their daily activities to buy, sell, charge and pay.

On the other hand, organizations with buying activity, producing (transforming), selling, charging and paying are manufacturing or industrial companies. So some authors mention that the cycles of a company can be operational, accounting and/or financial. The operating cycle "is the time that passes from the beginning of the production process to the collection of money for the sale of the finished product" Gitman .

Horngren, Sindem and Elliott point out that “in general companies follow a similar operational cycle, also called cash or profit cycle.

However, the accounting cycle of a business "is the process by which the accounting information is classified, ordered and summarized to obtain the final situation balance and the profit and loss account" according to. However, from the above, the financial cycle we notice how the accounting principle of a business in progress such as the Covi-19 Pandemics affects it, since one of its activities cannot be carried out therefore the operability isYou will be affected.

According to the above Gabriela Kegalj, partner of the Department of Profession. Under this same IFRS in Focus orientation (2020) they mention that it is important to reveal the information revealing the impact by the COVI-19 Pandemia, with the deterioration of non-financial assets and significant risks, commercial operations have taken measures to deal withThe pandemic raised. So to this the companies underway Ernst & Young (2020) refers to IAS 1, by appointing that the financial statements can be prepared to evaluate whether they are in a position to continue working for this will reveal all the information available to operate in the future.

The Avianca Holdings case, S.A. It is a Latin American company that has investments in airline in which it provides aircraft, specialized services and activity related to tourism, in which this company as well as others suspended the services this because of the virus pandemic known as COV-19. 

Therefore, it caused a decrease in the financial statements, this company voluntarily accepted to Chapter 11 of the United States Banking Code in the Banking Court of the Southern New York District in order to preserve and reorganize Avianca businesses. This transactional decision is expected to offer the service safely and reliably to the clientele under biosecurity protocologists as valley calms down the infectious virus of the Coronavirus virus

of which before this, the financial statements presented by Avianca Holdings S.A. and subsidiaries, with a cut to March 31, 2020, point out a material uncertainty related to the business business, calling attention to consolidated intermediate financial information, which indicates that the business group has suspended the payments of its aircraft lease contractsAnd certain credit obligations, likewise, are not complying with debt agreements on aircraft financing loans and other loans this statement is detailed in the notes to the financial statements of the multinational, it remains in the working capital in a monetary mannerof a percentage that reaches impact on business operators.

conclusion

The information of the financial statements is of many importance in companies since it is the operation of their business, and of the entire functioning internally or externally, in that sense that in the notes of the financial statements they are more knowledgeThrough the depth of the company where we find the information more explained and clarified where any movement that the company obtained for a certain time and its unexpected conditions in a certain case is described what is happening with the Pandemia of the Coronavirus occurred since the end of 2019. 

By virtue of this, the financial operating cycle of companies is their life, it is where everything related to its operation falls according to their natural relationship, due to the coronavirus pandemic, companies have not reflected a utility for the financial statements for the financial statements forWhat the pandemic has not allowed to operate well in its services for this reason Colombia and many countries find a large number of unemployed people. So the financial information (IFRS) in response to this reveals to us quantitative (monetary) and qualitative (narrative) information in relation to companies in times of pandemic, in which companies have implemented strategies to continue with their natural ideasof business.