Accounting in a world reshaped by COVID-19

By Bjorn Biel M. Beltran, Special Features Writer

There are few things in history that have caused a titanic upheaval to modern society like the coronavirus disease 2019 (COVID-19). Aside from plunging the world economy into the worst global recession since the Second World War, according to the World Bank, the pandemic has also exacerbated the risks associated with a decade-long wave of global debt accumulation, as well as steepening the long-expected slowdown in potential growth over the next decade.

In his foreword to this year’s Global Economic Prospects report, World Bank Group President David R. Malpass noted that “making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy.”

For the Philippines in particular, a comprehensive and coordinated effort between the public and private sector is necessary to rekindle the growth momentum that was lost to the COVID-19 lockdowns. Wilfredo A. Baltazar, Audit & Assurance partner at Deloitte Philippines, pointed out how integral the accounting industry is to this endeavor.

“Accounting has always played an important role in keeping businesses running — from small start-up entities to listed multinational corporations. As accountants and auditors, we are keenly aware of the importance of keeping our services going in support of those businesses, in support of our clients,” he said in an e-mail.

Accounting, he explained, involves a series of processes — from recording to summarizing, to analyzing, and lastly, to the reporting of financial information. In order for auditors to issue an opinion as to the fair presentation of the financial statements, accounting firms need to follow this process and consider relevant accounting standards (e.g., Philippine Financial Reporting Framework or PFRS) and statutory requirements from the government bodies (e.g., the Bureau of Internal Revenue or BIR, and the Securities and Exchange Commission or SEC) that apply to their clients.

“COVID-19 has significantly affected this accounting process, resulting in additional disclosures recognition and measurement requirements to maintain and achieve the fair presentation of the financial statements,” Mr. Baltazar said.

One of the significant changes in financial reporting involves taxes. On March 26, 2021, President Rodrigo R. Duterte signed into law Republic Act (R.A.) 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act, which reduced the corporate income tax rates and rationalized the current fiscal incentives to provide additional COVID-19 related reliefs to taxpayers. This resulted in additional disclosures in annual financial statements ending Dec. 31, 2020, in compliance with the PFRS (i.e., Philippine Accounting Standards 10 or Events After Reporting Period) as well as a change in the amount of tax to be filed and paid to the BIR.

There was also R.A. 11494 or the Bayanihan to Recover as One Act, which directed all banks, financing companies, lending companies, real estate developers, insurance companies, pre-need companies, and other public and private financial institutions to grant a one-time grace period of 60 days for the payment of loans falling due on or before Dec. 31, 2020 without interests, penalties, and other charges.

“This was a challenging job before the coronavirus pandemic and the health crisis has only made it tougher,” Mr. Baltazar said. “Nevertheless, in order to sustain, and in some cases, increase the efficiency and effectiveness of the operation, digitalization and technology have played a critical role in the accounting industry.”

He noted that the SEC recently launched its Online Submission Tool (OST), which allows companies to file and submit their Annual Financial Statements, including other reportorial requirements such as the General Information Sheet and other annual reports, online, in recognition of the current challenges surrounding movement and face-to-face transactions. This technology enables the SEC to continue operating and serving the public while ensuring the observance of the health protocols implemented throughout the country.

Another way technology is reshaping the accounting landscape is through the transition of office-based work to remote work-from-home setups.

“We believe remote work is one of the more notable changes to come out of this crisis. This has been the dominant mode of work in the accounting industry during the COVID-19 pandemic. On top of health and safety issues, working from home is convenient for some accounting professionals; it allows them to get a better handle of their work-life balance,” Mr. Baltazar said.

Yet, such drastic changes can also have disadvantages. Mr. Baltazar noted that some professionals have admitted that they find it more conducive to work in an office, that they find it difficult to transition to work-from-home because they’re surrounded by distractions, making it difficult for them to concentrate and be productive.

“Another change we saw during the pandemic is the quick adoption of new technology. Accountants generally go through voluminous paperwork, whether electronic or hard copy, to get their work done,” he added.

With the pandemic, majority of the paperwork and even the procedures that needed to be conducted by accounting firms had to be done online and virtually. Several companies have incorporated virtual communication applications and other digital tools into their operations to carry out essential procedures involving their accountants, such as vouching, tracing, stocktaking, etc.

How long these changes last, Mr. Baltazar noted, will depend on the ability of the national government to control the spread of COVID-19.

“Accounting post-COVID will likely entail more use of virtual communication and collaboration tools amongst co-workers and clients, including client onboarding processes,” he said.

“Right now, besides still battling the spread of the coronavirus, the world is also grappling with vaccine shortage and vaccine hesitancy. People are still living with a lot of fear and uncertainty so we expect remote work to be the preferred option for many. As such, virtual communication and collaboration tools, and other digital technology will continue to dominate,” he added.