Madrid, April 1, 2020
As a result of the current COVID-19 pandemic, the issuing Council of the International Accounting Standards Board (IASB) published on March 27 a communication in which it stressed that it is working closely with prudential regulatory bodies and stock markets on the application of IFRS 9 in this environment of COVID-19.
The IASB mentions in its communication that several of these regulators, both at European and global level, have issued recommendations on the "prudent" application of this standard in the results of the first quarter of 2020. The IASB encourages entities to take into account these recommendations from the regulators.
The supervisors of the securities markets are considering extensions to the deadlines for submitting the annual and / or quarterly information (ESMA in Europe, SEC in the USA, CNMV in Spain). In spite of this, right at the very moment of publication of annual accounts and the holding of Shareholders' Meetings, both national and international regulations have been modified to include in such annual accounts any impact deemed to be derived from the effects of COVID-19. Furthermore, supervisors are encouraging entities to publish potential impacts provided that the estimates are reliable.But what can we expect from the quarterly results presentations that entities have accustomed us to?
Volatility in the markets has skyrocketed and company prices reflect uncertainty about the macroeconomic scenario in the short and medium term. Current estimates of a “V” recovery can be diluted if the pandemic extends further in time and if it travels from country to country becoming an unprecedented global crisis. Many institutions and organizations propose measures, some derived from the lessons learned from the financial crises that started in 2008. Lower interest rates, injections of liquidity from central banks, public aid, and the issuing of “coronabonds”. In some sectors, the cancellation of dividends is even announced, as has been the case with European banks following the recommendation of the European Banking Authority (EBA) to freeze the payment of dividends until at least October 1st.
Now that the first quarter has ended, as financial analysts we will have to be very aware of the companies' earnings presentations or possible “profit warnings” that they make public. Many IBEX 35 companies usually publish quarterly results in late April or early May. But could we also see a delay in the presentation of results to the markets? Could entities wait for the horizon to clear? Do we need to wait for the results of the first semester to be able to see a reflection of the impacts of this pandemic? In less than a month, we will have the answer.
President of the Financial and Non-Financial Information Commission of the IEAF
Gregorio P. Gil Ortiz Certified ESG Analyst CESGA® Certified International Investment Analyst CIIA® Certified European Financial Analyst CEFA® Accredited Accounting Expert ECA®