A Reliable Financial Report During the Pandemic? Why Not?


A Reliable Financial Report During The Pandemic? Why Not?

Every financial report has a purpose. The function of financial reports can be seen based on the needs of each position, which is divided into three. The first position is decision making. A company’s financial statement is very important for managers because with these financial reports, managers can make decisions for their companies based on the financial reports that have been made. The second position is employees. Financial reports are very important for companies because through the financial report, they can see the development of a company in the future. If the company has not received a profit, it can encourage employees to improve their performance in order for the company to earn one. The last position is investors. The financial reports of a company are needed by an investor To determine whether they want to invest or skip the company. With the existence of a company’s financial report, investors can find out how well the company performs. Moreover, they can see and even measure how much profit that the company gets.

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It is no doubt that financial reports should be reliable. Information in a financial report is reliable when it complies with 3 conditions, namely being free from misleading notions, material errors, and being presented in a sincere and honest manner or often known as Faithful Representation. The reliability of the information in a financial report is also related to its relevance. The relevant information in a financial report is the one that is reliable, and vice versa.

There are five conditions that affect the reliability of financial reports. First, the information must honestly represent actual situations, transactions, and events that happened within the company. Second, it needs to be recorded and presented in accordance with reality. Third, it should be directed to the general needs of the user, independent of the needs and desires of certain parties. There must be no information that is beneficial to some parties, which will be detrimental to others. Fourth, the uncertainty faced in the preparation of financial statements is recognized by disclosing its nature and level and by using prudence in preparing financial statements. Last but not least, to be reliable, the information in the financial statements must be complete in terms of reality and cost. Intentional non-disclosure (omission) results in incorrect or misleading information and is therefore unreliable and lacks relevance. 

Aside from the conditions above, every company has the same goal, namely achieving profit. Profit is one of the measurements of a company’s effectiveness in its financial report. The profit earned is largely determined by the company’s activities. During this COVID 19 pandemic, many things prevented companies from carrying out their activities properly. Many companies are worried about the 2020 financial statements because of the slowing economy due to coronavirus. The coronavirus pandemic can have a significant impact on the 2020 financial statements, especially in various aspects, namely company revenue which will decrease due to weakening people’s purchasing power and possible inflation. The coronavirus pandemic has also greatly affected the supply chain of companies, especially those that get raw materials from China. The price of raw materials soared because of the scarcity of goods that could increase the cost of goods sold. Also, some companies may decide to reduce the number of workers to balance declining activities. Furthermore, the rupiah exchange rate which has decreased in value against the dollar during the corona pandemic can affect financial reports if the company is exposed to foreign exchange risk, especially if the company has debt/receivables in dollar currency and does not hedge. Company profits may decline in 2020 due to the coronavirus pandemic.

Financial reports are useless if they are based on an unreliable and inaccurate recording of transactions. Financial reports published in times of uncertainty due to the corona pandemic must reflect this uncertainty in the financial statements. Companies cannot carry out earnings management activities and make inaccurate representations of the economic phenomena of companies affected by this pandemic. For example, if the company experienced a significant decline in sales in the first quarter of 2020, this fact must be reflected in the first interim financial statements of 2020. 




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