Valuation Research Group Argentina
Valuation Research GroupArgentina

Financial Planning in times of COVID-19


The Coronavirus pandemic has forced governments and companies to take extreme measures, which will result in very significant variations not only in the future results of these companies but in their financial equilibrium as well.

These measures will force companies to examine carefully the impact on the management of their cash in the short and medium-term as well as the consequences they will have on their financial statements.
 
Some events that can bring negative effects to the results of these companies are:
 

  1. Impairment of goodwill: The possible reduction in expected future cash flow generation may adversely affect the impairment test of goodwill. Companies with an obligation to publish quarterly financial statements will face this problem starting with the statements relative to the 1st quarter of 2020;
  2. Impairment of assets measured by cash-generating units: same situation as goodwill impairment described in item 1 above;
  3. Mark-to-Market of Equity Funds: The valuation of company stock portfolios that make up an equity fund may be substantially affected by the change in market conditions;
  4. Effects of covenants of finance contracts on future results: covenants that establish penalties when companies fail to maintain certain financial ratios within limits pre-determined in finance contracts can be triggered;
  5. Valuation value of contractual guarantees: Banks and other creditors may require, in accordance with their contracts, additional guarantees in the event of devaluation of the guarantees given previously.
  6. Recovery of accumulated losses: The reduction of the probability or the extension of the estimated term for the recovery of accumulated losses maintained by companies as Recoverable Taxes in their assets may be affected due to the expected reduction in future results;
  7. Effects on projects in progress - rates of return and payback: Projects in progress may experience delays and/or cost increases, with a reduction in their expected profitability.
  8. Earnouts: purchase and sale contracts with an earnout clause yet to be determined may suffer significant effects due to the future results of the acquired entity.

 
VRG has national and international experience in preparing opinions on all of the items described above. If you have any questions or needs regarding these topics do not hesitate to contact us.

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