Impairments, exceptional items may come to visit companies again

Mumbai: The issue around impairments and impact of the pandemic on profit and loss account and balance sheet of companies may come to visit India Inc again.As the markets and economy seem to be buoyant around upcoming Covid vaccines, companies may have to relook at the impact of the pandemic on their financials. “Exceptional items” attributed to Covid-19 crisis had become a sore point between companies and their statutory auditors, as a large number of companies had started using Covid-related adjustments to mask dismal business results delivered in the pandemic period.While preparing financial results, some companies had reported certain items like loss of revenue and increased costs in a special category — exceptional items — so that the profit figure looks better.In a large number of cases auditors and companies even had a standoff on the impairment amounts they need to take. Impairments on goodwill and other investments were taken by a large number of companies.Companies had said that since these adjustments are Covid-related and would not occur under ‘normal’ circumstances — and some of these losses may be material in nature — they should be treated differently. An ET analysis, published on May 23, showed that out of the 153 listed entities that announced their annual results, 43 had made adjustments to their books that were directly attributable to the Covid-19 crisis.The pandemic has led to a marked change in the way certain industries might earn revenue.
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