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Exemplifying the Effect of Big Bath Accounting in the Pandemic

Author

Listed:
  • Valentin BURCA

    (West University of Timișoara)

  • Dorel MATEȘ

    (West University of Timișoara)

  • Oana BOGDAN

    (West University of Timișoara)

Abstract

Currently, the economic environment is significantly affected by the COVID-19 pandemic. The effects are visible in the area of accounting and financial reporting policies and practice as well. The aim of this article is to show how accounting estimates can be affected by the current macroeconomic context and the COVID-19 crisis. The discussion focuses especially on the area of accruals reported to cover the risk of uncollectable receivables, as addressed in IFRS 9 Financial Instruments. The example illustrates specific risks generated by the higher uncertainty in the economic environment caused by the COVID-19 crisis and by the customers’ issues with liquidity in these times. The overall conclusion is that financial statements related to the pandemic period have to be carefully reviewed as they are subject to accounting measurement estimates that could be significantly affected by discretionary professional judgment or by the lack of suficient guidelines provided by enforcement authorities.

Suggested Citation

  • Valentin BURCA & Dorel MATEȘ & Oana BOGDAN, 2021. "Exemplifying the Effect of Big Bath Accounting in the Pandemic," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 2(2), pages 3-16, February.
    • Handle: RePEc:ahd:journl:v:2:y:2021:i:2:p:3-16
    DOI: 10.37945/cbr.2021.02.01
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    Citations

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    Cited by:

    1. Iamandache (Florea) Laura Andreea & Horaicu Adriana & Stoica Raluca Andreea & Iacob (Zavincu) Adriana & Zuca Marilena & Munteanu Victor, 2023. "The Importance Of The Financial Audit In Preventing Accounting Errors And Fraud," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 373-385, December.

    More about this item

    Keywords

    financial reporting; big bath accounting; business models; COVID-19;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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