Essay Sample on COVID-19: Accounting Rules in the Global Market Finance Standstill

Introduction

Measurement of the information system, communication, recording, and making identification of information concerning a business activity refers to accounting. Accounting provides standards to which a business relates its anticipated profit or losses (Wild et al., 2015). The rule that has been in use concerning accounting as the language to which a business communicates and makes a decision has recently come to a stand-down process as the coronavirus novel raises.

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Global market finance has been shaken by the Covid-19 making the usual normal process of predicting credit losses challenging. With the uncertainty of the CDC to predict the extent of virus evolution, the ability of business has been strained in collecting receivable. If businesses will raise credit risks forecast, losses cover reserves estimation could rise consequently resulting in reduced profitability. The Current Expected Credit Losses (CECL) companies have incurred consistent losses since the emergency of the virus (Maurer, 2020). These companies even though aware that the situation could worsen, there is no allowance to making losses reserves in the future. Accounting standards have hence been trimmed by the Finance Accounting Standard Board in the U.S to accommodate the issue brought forth by the coronavirus. The purpose of accounting is to highlight useful information necessary for decision making. To ensure that the information it trustable, there is a need for ethical accounting. Business accounting highlights that through the standard-setting, there is protection to the investor by maintaining an orderly, efficient, and fair market (Wild et al., 2015). Thus, the FASB makes a change to the accounting standard to bring about transparency in investors. By so doing, the company aligns issued loans with a true risk.

The standard put forth by the FASB must with no doubt be adopted by all private and public businesses. The break of the corona epidemic mostly has affected business financial institutions as they cannot predict their loan reserves (Maurer, 2020). Thus, business accounting has been disrupted to the extent to which projected future risk depends on economic indicators like the rate of unemployment, housing prices, and growth of gross domestic products.

In developing an ethical accounting model, it is important to analyze all options that will lead to decision making. The FASB makes a criticizing decision on these accounting rules. The new standard creates volatility in the company earning by giving businesses discretion in while in the application (Maurer, 2020).

Conclusion

Business accounting has been identified as an important tool in organizational decision making. The break of the coronavirus epidemic months ago has interfered with all standard accounting processes. There has been a transition in the standard accounting following these issues to accommodate ethics and transparency highlighted in the chapter as the basics of business accounting. Covid-19 has mostly affected the accounting process of the CECL business. Such companies are dependent on "currently expected credit loss rule". Uncertainty about the extent of coronavirus has brought the FASB to makes a change to the accounting standard to bring about transparency in accounting investments.

References

Maurer, M. (2020). Coronavirus Could Affect How Companies Forecast Credit Losses. The wall street journal. The outbreak could complicate businesses' efforts to comply with a new accounting standard. Retrieved from https://www.wsj.com/articles/coronavirus-could-affect-how-companies-forecast-credit-losses-11583345972

Wild, J. J., Shaw, K. W., & Chiappetta, B. (2015). Fundamental accounting principles. McGraw-Hill Education.