A lot of effort is being made by governments and businesses to help the Travel, Tourism, and Hospitality industry recover.
When will the industry recover?
Greater professional scepticism
Factors that need to be considered when assessing Going Concern are largely defined by ISA (International Standard on Auditing) 570. However, these are unprecedented times and professional bodies as well as regulators are urging the use of greater professional scepticism.
Careful assessment of management assertions is required, especially around how with changing needs of the business and leisure traveller will impact turnaround. For example, will companies host as many conferences in person as they used to? Or are they now used to online conferences. Cash flow projections hence need to be robustly tested. There is concern about how quickly holidaymakers and businesses will resume travel.
Lastly, financiers and lenders have so far been lenient and given generous payment holidays. There is concern about how long this will last and more importantly, how will arrears that have built up in the past year, be cleared.
Working together for a sustainable future
To have a recovery that is both sustainable and effective, stakeholders need to work together in ensuring financial reporting is true and fair. Whilst there is an element of estimates, all stakeholders need to ensure they are offering their full support to minimise the impact of Expected Credit Losses and provisions, which will help preserve stakeholder value and ensure businesses can operate as a Going Concern.*The views expressed are the author’s and not ICAEW’s.