Are your accounting policies appropriate and up to date?

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Accounting policies are the specific principles, bases, conventions, rules, and practices applied by a company in preparing and presenting its financial statements.

The company’s management shall use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable.

A company needs to be sure that the accounting policies reflect current accounting requirements. A company may be concerned that poorly drafted policies may result in errors and inconsistent application of accounting requirements.

When choosing application of appropriate accounting policies, the following should be considered:

  • Substance over form
  • Objectivity
  • Fairness
  • Materiality
  • Prudence

A company shall select and apply its accounting policies consistently for similar transactions. A company’s choice in accounting policies will indicate whether management is aggressive or conservative in reporting its earnings.

A company’s accounting policies should be reviewed regularly to ensure that they remain the most appropriate to its particular circumstances. A company should implement a new accounting policy if it is judged more appropriate to the company’s particular circumstances than the present accounting policy.

WHAT QUESTIONS DO YOU HAVE?

If you need assistance with reviewing your current accounting policies or applying a change to an accounting policy contact us here in Cooney Carey on 01 677 9000 or send us an email to info@cooneycarey.ie.   We would be delighted to assist you.

To keep in touch, connect with us on LinkedIn.

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    Posted on August 6, 2020 by Cooney Carey

    Business Reaction to Covid-19

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    We have witnessed the impact of Covid-19 on businesses in Ireland since mid-March 2020. It has had a particularly devastating effect in the retail and hospitality sectors.

    The Government introduced reliefs at an early stage of the pandemic.  In particular, the TWSS scheme has been a success by delivering assistance directly to affected businesses.  The July 2020 Jobs Stimulus announced on 23 July 2020 has extended the TWSS scheme to April 2021 which will continue to support the businesses most in need.

    Other positive measures introduced in the July 2020 Jobs Stimulus includes, debt warehousing for Revenue debts and the extension of the “Covid-19 Re-Start” grant.  It was widely anticipated that the Vat rate for hospitality would have been reduced from 13.5% to 9% to give a direct impetus to hospitality. Even though the Vat rate was not reduced the option to do so remains open to Government.

    With challenges come opportunities.

    We have seen many of our clients adapt their businesses as follows:

    • Changing how they deliver their product or service to market – clothing retailers have experienced expansion in online activity and sales
    • Adapting their product offering to meet new demands during lockdown e.g. restaurants selling and delivering “cook at home meal packs”, deliveries to cocooners and the local area
    • Identifying and filling gaps in markets – off-licences and grocery retailers stepped into the market space normally served by pubs
    • Harnessing the adaptability of their employees to efficiently work remotely

    All businesses have been affected to some degree and need to continue to adapt, examining their businesses from the ground-up, seeking opportunities and improvements, reducing reliance on affected markets and investing in technology solutions to further empower staff and to retain and manage relationships with key customers and suppliers

    We must continue to act responsibly to mitigate the spread of the virus.  In order to get people back into restaurants, pubs, hotels, offices, travelling for recreation/business, the end user must trust the provider.  When we achieve the necessary trust levels in a safe manner, we should see some of the “old normal”.

    We continue to work with our clients to meet this challenge and to harvest the opportunities.  We wish you all well.

    WHAT QUESTIONS DO YOU HAVE?

    We are happy to help. Please contact us on 01 677 9000 or send us an email to info@cooneycarey.ie, we would be delighted to assist you.

    To keep in touch, connect with us on LinkedIn.

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      Posted on July 30, 2020 by Cooney Carey

      RECALIBRATE: DEBT REORGANISATION AS A CONSENSUAL SOLUTION

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      The Central Bank, in its latest Financial Stability Review, 2020 has warned that the scale of economic shock due to COVID-19 is unprecedented and we are perhaps only at the end of the beginning as the challenges emerge. The review further goes on to state Uncertainty remains about the likely mortgage default rate resulting from Covid-19. In some cases, the income shock for mortgage borrowers will persist beyond the length of the payment break and will require additional forbearance, restructuring or resolution

      While the Irish Government has announced various measures like SBCI COVID 19 working capital scheme, Temporary Wage Subsidy Scheme, Microfinance Ireland Business Loan, etc to combat working capital challenges for businesses, many businesses might not meet the criteria. This certainly will put more stress on the liquidity of such companies. It is likely that due to this, a number of companies, will not be in a position to meet their financial obligations and might eventually fail to sustain in certain cases. But such a scenario should not always lead to insolvency or winding up of business operation. In such cases, Debt reorganisation acts as a consensual solution for all the stakeholders involved. This article sets out the debt reorganisation solutions available to a company, in case such a scenario transpires.

      FORMS OF DEBT REORGANISATION

      1. Debt Restructuring

      This approach involves reducing financial distress by renegotiating the debts of any company with its creditors to allow the business to restore liquidity and embrace business continuity. Ways in which a company can leverage debt restructuring techniques are as follows:

      1. Renegotiate the terms of the credit or debt facility by extending the period, reducing interest or requesting grace period for repayment of the debt.
      2. Debt- Equity Swap: This process involves conversion of debt to equity. Under this arrangement the creditors/ lenders agree to forego a certain amount of outstanding debt in return for equity or stake in the business. The lender converts the amount of loan into an equivalent ownership/stake in the company. This option helps the company maintain its cashflows by ceasing the obligation to pay back the capital and interest amount. Thus, it is a method by which a corporation improves its financial position by eliminating liabilities and protecting its assets.
      3. Informal Debt Agreement: This process is dependent on the bargaining power of the Debtor and their repayment history. Under this debtor company may reach out to its creditor and lenders to negotiate for lenient terms or a partial write off of debts.

      2. Debt Refinancing

      Debt Refinancing involves replacement of the existing debt by another debt with more favourable terms. Under this arrangement another prospective lender agrees to acquire the existing debts and pay down the former lender. This is a more popular method considering the quicker process and positive impact on credit score. Again, this helps the company in taking advantage of better interest rates and more time period in certain cases, thereby freeing up cash and meeting working capital requirements to rebuild operations

      The current economic landscape is changing rapidly, and companies are finding it difficult to assess if they can avoid breach of debt covenants. Thus, in this regard, it is important for business owners and individuals to familiarise themselves with discussed available options and formulate strategies accordingly for their long-term survival.

      WHAT QUESTIONS DO YOU HAVE?

      We are happy to help. Please contact our corporate finance department on 01 677 9000 who would be delighted to assist you. Alternatively, you can send us an email to info@cooneycarey.ie.

      To keep in touch, connect with us on LinkedIn.

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        Posted on July 21, 2020 by Cooney Carey

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