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COVID-19 and its accounting implications

The COVID-19 pandemic has resulted in challenges and difficulties previously unknown to economies and businesses worldwide. Travel bans, quarantines and lockdowns have become standard measures implemented by governments. Most businesses, regardless of industry, are losing revenue, experiencing disrupted supply chains and even possibly facing permanent closure. Economies are severely impacted with recession looming large on the horizon.

Are companies willing to divest after the pandemic?

In 2019, companies in the Asia Pacific sought to sharpen their focus on capital allocation, which include, among others, carving out non-core businesses or underperforming assets. In fact, the 2019 EY Global Corporate Divestment Study reported that 82% of executives in these companies planned to divest within the next two years. However, in light of the COVID-19 crisis — with governments implementing border closures and lockdowns that have triggered business shocks and disruption — will the appetite for divestment remain high among Asia Pacific companies as they look beyond the crisis?

CREATE: Tax reform response to COVID-19

In last week’s article, we discussed the salient features of the CREATE bill: the immediate Corporate Income Tax (CIT) rate cut; the extended NOLCO application; the rationalization of fiscal incentives, and other notable features. This week’s article will focus on the proposed fiscal incentives available to prospective and existing investors as well as the strategies that investors may explore to maximize tax perks.

CREATE: Tax reform response to COVID-19

To recover from economic recession and to advance towards corporate healing, the Department of Finance (DoF) fine-tuned several provisions of the Tax Reform Package 2 bill. The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) is the latest incarnation of the TRABAHO and CITIRA bills and is now part of the COVID-19 stimulus package put together by the government’s economic team.

Consensus in lease concessions due to COVID-19

In the first part of this two-part series, we discussed how to assess whether changes in lease contracts are lease modifications, and covered lease concessions that are treated as variable rent, lease modifications, and accounted for as government grants.

Consensus in lease concessions due to COVID-19

Almost every part of the country has been, and remains, under community quarantine to help curb the COVID-19 pandemic. Business owners were forced to announce the temporary closure of non-essential establishments such as shopping centers, schools and office buildings, supermarkets, drugstores and other essential businesses which saw changes in operating hours and on-site operations, while food providers such as restaurants were only allowed to provide take away and food delivery services. As a result, commercial tenants found themselves in a dramatic situation where they lost all their revenue overnight while their obligations under their lease agreements continue to apply.

Transforming IA during the pandemic

The COVID-19 pandemic caught the world off guard, adversely affecting peoples’ lives and businesses on an unprecedented scale. According to the EY Global Risk Survey in 2020, four out of five of companies’ board members and CEOs across the globe said their businesses were not well-prepared to face the pandemic crisis head on.

Stay safe! Cybersecurity during COVID-19

The COVID-19 pandemic has forced a majority of companies to promote work from home (WFH) arrangements. What used to be considered a benefit to improve employee work-life balance is now the new normal for most companies as a safety measure against coronavirus infection. While some companies have proven to be technologically well-equipped for WFH arrangements, unfortunately, many are also not ready. The ill-equipped are once again the targets of cyber threat actors. These insidious groups know very well the meaning of Winston Churchill’s words, “Never let a good crisis go to waste” and they will take advantage of the seemingly chaotic situation. They are even more active now due to three reasons: weakened corporate cybersecurity controls, taking advantage of FUD (Fear, Uncertainty and Doubt), and heightened use of technology.

Short-term financial management for COVID-19

COVID-19 is generating unprecedented levels of challenges in company ecosystems -- including supply chains, customer demand, strategic planning and operations, and liquidity -- alongside high levels of uncertainty and volatility. Given this, it has become more essential than ever for companies to focus on short-term financial management as part of their overall business continuity plans.

Strengthening today’s supply chains for tomorrow

Ever since the World Health Organization (WHO) declared the global COVID-19 outbreak a pandemic on March 11, nearly every country has been hard-pressed to contain the spread of the coronavirus.

Annual reporting despite business interruptions

“Gradually and then suddenly” was how Ernest Hemingway described going bankrupt in The Sun Also Rises and the description seems to apply to the global response to COVID-19. The Securities and Exchange Commission’s (SEC) response also follows this pattern, making adjustments over a short period to address the effects of the Enhanced Community Quarantine (ECQ) on annual reporting.

Is your business COVID-19 resilient?

The World Health Organization (WHO) has declared COVID-19 a public health emergency of international scale, impacting governments and businesses alike with unprecedented disruption and risks. Companies continue to feel the business and financial shocks caused by the pandemic. COVID-19 has become a black swan event, unpredictable and with potentially severe consequences.

Testing your capital agenda amid COVID-19

We are currently in an unprecedented global crisis, and every country is struggling to deal with outbreaks of COVID-19 in their respective jurisdictions. Luzon is still in the midst of an enhanced community quarantine with other parts of the country rapidly following suit. We are faced with rising COVID-19-positive cases with our frontliners and health care system being pushed to the limits.

Tax breaks in these trying times

As we discussed in the first part of this article, the tax system in the Philippines has been significantly affected by the strict implementation of the enhanced community quarantine (ECQ) and social distancing measures imposed by the Government to address the COVID-19 crisis.

Tax breaks in these trying times

The government has announced several measures to contain the spread of COVID-19. President Rodrigo R. Duterte has placed Luzon under enhanced community quarantine and imposed stringent social distancing measures, with the entire country under a state of emergency.

Are you ready for the data-driven digital era?

Digital technologies offer new opportunities to create value by leveraging data captured while companies carry out business as usual. However, while most companies embark on data-driven digital transformation, many still struggle to 1) determine the right data strategy that allows them to become a truly data-driven organization and 2) properly manage and govern their data. In fact, data management and governance ranked as the second top IT challenge identified by business tech leaders after IT security and privacy. As data increases in scale and complexity, some organizations remain fragmented and still work in silos to collect, transfer, process, analyze and store their growing data. Many companies cannot adapt to these changes and find themselves stuck in the archaic way of managing data.

Will it be endgame now for 5% GIT?

Once again we wait to see if the Corporate Income Tax and Incentives Rationalization Act or the CITIRA bill (either House Bill No. 4157 or Senate Bill No. 1357) will pass into law this month. The bill is being repackaged for the third time after its predecessor bills were no legislated (TRAIN 2 and TRABAHO). If passed, CITIRA is expected to have a strong impact on Philippine Economic Zone Authority (PEZA)-registered firms.

How to make digital taxation click

Digital technology has undoubtedly revolutionized the world economy. With the growing popularity of online shopping in particular, businesses can reach consumers without needing a physical location. The increasing digitization of the world economy has not only made the sale of goods and services instantaneous and efficient -- it has also provided a convenient way for consumers to purchase goods without having to waste time being stuck in heavy traffic.

Foreign nationals and the taxman

Foreign nationals working in the Philippines are governed by at least three sets of rules -- those of taxation, immigration and labor. Only by fully complying with each set of rules can foreign nationals ensure a fruitful and worry-free stay in the Philippines. This article focuses on taxation.

How workable is working from home?

Organizations often claim that their most important assets are their people and studies have indicated this to be true. This is the reason why companies are always looking for ways to motivate their workforce and maintain high job satisfaction. While some consider compensation and benefits as the main drivers when a job seeker decides to accept an offer, we now see other factors that are equally relevant to applicants and recruits. A leading consideration is the flexibility of an employer’s work arrangement policies.

When the going gets tough, the tough get going

Just over the course of one month into 2020 and the world has been bombarded with a flurry of disasters and unforeseen events. Headlines have been filled with alarming and heartbreaking news -- from the wildfires in Australia, to the eruption of the Taal Volcano, and just recently, the outbreak of COVID-19 (coronavirus disease 2019) affecting numerous countries around the world.

Banks rate cybersecurity as top concern

Board members and Chief Risk Officers (CROs) of banks and other financial institutions have identified cybersecurity as their top short-term (12 months) risk priority. This was revealed in the Tenth Annual Global Risk Management Survey conducted by EY (Ernst & Young) and the Institute of International Finance. Survey participants comprised 94 firms in 43 countries with 23% based in Asia. Cybersecurity emerged at the top spot for the third straight year, considering that it only surfaced as a risk concern in 2015. We see this as a result of rapid technology development and the onslaught of banks embarking on digital transformation journeys in the last five years.

Transfer pricing and tax avoidance: What does the CITIRA bill say?

Government investment promotion agencies offer tax incentives to attract investors. Many companies, especially those in priority and emerging sectors, benefit from such incentives in the course of doing business. In some cases, companies engage in related-party transactions, such as transactions between a parent company and a subsidiary, or between affiliates. However, according to a Department of Finance (DoF) and Bureau of Internal Revenue (BIR) analysis, such practices may give rise to abusive transfer pricing schemes, deemed to cost the Government billions in lost revenue each year.

Rising from the ashes: How to claim tax relief from Taal’s...

The Philippines is vulnerable to natural calamities due to its geographical location. The archipelago is frequently exposed to the devastating effects of natural disasters like typhoons, earthquakes, and -- from time to time – volcanic eruptions.

Estate tax amnesty for non-resident Pinoys: Yay or nay?

Among all the internal revenue taxes imposed in the Philippines, estate tax is arguably one of the most neglected. It is not uncommon to see estate taxes remain unpaid for several years after the death of the decedent until the heirs see the need to transfer the inherited property. These properties then remain idle with their economic benefit unutilized.

Smart, savvy and strategic cyber risk management

We regularly hear and read about hacks, security breaches and similar cybersecurity incidents that expose vulnerabilities in corporate and government digital security systems. The reality is that most companies and organizations lack the internal cybersecurity expertise and capability to combat external threats, which lead them to seek external solutions.

Making a difference, one ripple at a time

As a new decade begins, we reflect upon the year that just passed and look forward to what may be in store for us in 2020 and beyond.

On purpose, passion and possibilities

Whenever the calendar year winds down, many among us find it an opportune moment to reflect and reevaluate the last 12 months. We recall the challenges we faced, revisit the dramatic changes in the business landscape, and ponder how we, as individuals and organizations, have grown and evolved. We have seen how companies have shifted their focus to global trends and technologies, how people are taking on new jobs that didn’t even exist a few years ago, and how the challenges of sustainable development have become the top priority for organizations.

Avoid these pitfalls on the road to digital transformation

While digital transformation is one of today’s most frequently-used buzzwords, the concept itself is constantly transforming. This is because every digital transformation journey is different for every company, and it can be difficult to have a single definition that applies to all.

Act fast before the FAST Act interferes with US Passports

This article applies to US citizens, US nationals and their employers, the latter to ensure US Federal tax compliance. “Seriously Delinquent” tax debts can cause suspension, denial, or nonrenewal of US Passports.

Cars, not horses: Creating a sustainable growth advantage

Realizing growth is a challenge for all entrepreneurs who dream of creating and scaling their startups into tomorrow’s multinational corporations. However, early successes in the fast-paced initial phase of development do not necessarily guarantee an enduring competitive advantage and business sustainability. What then sets apart market-leading entrepreneurs from those who failed?

Are sustainability reports a fad?

Wider corporate reporting is being promoted as a means to improve corporate governance, as stated by International Accounting Standards Board (IASB) Chairman Hans Hoogervorst in his speech in Tokyo on Aug. 29, 2018. The IASB chair admitted that financial reporting has its limitations and cannot adequately capture certain elements that might be important to stakeholders, such as the intangibles that are vital to the company’s business model and its strategy for long-term value creation. Financial statements are essentially backward-looking reports that contain limited forward-looking information, which means that in their current state, financial statements do not address emerging sustainability issues that might impact a company’s future cash flow.

SMEs in the digital world: reboot or robots?

With the dizzying speed of digital disruption occurring in the global business environment, small and medium enterprises (SMEs) are increasingly realizing the urgent need to explore digitalization. Incorporating digitalization in their business will help expand and create new sources of value for their enterprises to remain competitive and relevant to their markets.

Seven lessons from IFRS 17 live engagements

The financial statements of companies issuing insurance contracts are bound to change dramatically beginning Jan. 1, 2022, as the date marks the global adoption of International Financial Reporting Standard (IFRS) 17.

Digital audits: the advantages add up

The rules of business have changed. Gone are the days when business leaders had the luxury of time to ponder significant business decisions and make momentous changes to their organizations or processes. Now, businesses are transacting and making decisions practically in real time, which also necessitates that businesses manage risks and leverage opportunities with speed, accuracy and efficiency.

Is there a sweet spot in the new tax laws?

In the previous article, we discussed the salient points of the excise tax on Sweetened Beverages (SBs), the costs associated with its implementation, compliance with applicable regulations, and the applicability of the Prior Disclosure Program (PDP) to importers of SBs. In this second part of the article, we will examine some business considerations which importers as well as producers in the SB industry should consider, including possible opportunities brought about by the new excise tax law.

Is there a sweet spot in the new tax laws?

When Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law took effect on Jan. 1, 2018, it introduced Section 150–B of the Tax Code, which imposes excise tax on manufacturers and importers of Sweetened Beverages (SBs). This article specifically covers importers of SBs.

Responding to competition through organizational agility

With the emergence of threats or opportunities brought about by disruption in business, many organizations are being forced to not only reshape their business model and priorities, but also their operating model and business practices.

Will REITs soon be within reach?

Real Estate Investment Trusts (REITs) had been gaining propulsion globally for many years. Locally however, since the introduction of REITs a decade ago, industry players have yet to launch the first such offering to the public. Recently, there have been positive regulatory developments that are expected to provide an attractive landscape for potential players to proceed. While it is true that there are many opportunities in this field, players must find ways to operate within the regulatory framework, allocate the asset portfolio effectively, comply with governance requirements, and adapt to continuing industry disruption.

Transfer pricing audit issues requiring attention

In the previous article, we discussed the salient points of RAMO No. 1-2019, the Transfer Pricing (TP) Audit Guidelines and the urgent need to have a TP documentation to prepare for the TP audits.

Transfer pricing audits are coming… Get ready!

Related party transactions have come under renewed scrutiny from regulators lately due to their importance in promoting corporate good governance and in preventing further erosion of the tax base.

Preparing for the IBOR transition

In the first part of this article, we highlighted the current state of Interbank Offered Rates (IBORs), the factors behind the shift from IBORs to Alternate Reference Rates (ARRs), and the top 10 challenges to be faced in transitioning to the ARRs. In this second part, we will delve into the key operational, financial and accounting considerations that come along with the imminent discontinuation of IBORs.

Preparing for the IBOR Transition

Financial markets globally are preparing the shift from referring to Interbank offered rates (IBORs) as a benchmark for financial products and services to alternative reference rates (ARRs).

Redefining corporate rules

In the first part of this article, we covered Republic Act 112321 or the Revised Corporation Code of the Philippines (RCC), which redefined the corporate rules to promote ease and flexibility in doing business, as well as take full advantage of technological innovation.

Redefining corporate rules

For nearly 40 years, Batas Pambansa 68 or the old Corporation Code governed the way corporations operate in the Philippines. While the Code has been interpreted by jurisprudence and has been complemented by the Securities Regulations Code (SRC), the Revised Code of Corporate Governance, and the Foreign Investments Act, among others, it has taken nearly four decades to overhaul its provisions.