The global pandemic crisis caused by the Coronavirus has a negative impact both on public health and on the economy as a whole across all sectors of activity.
Morocco, like other countries in the world, has put in place several preventive measures to deal with this crisis.
The first measure was the publication of a Decree-Law No. 2-20-292 on 23 March 2020 in the Official Gazette, establishing a state of health emergency to limit gatherings and contain the spread of the pandemic in the design of maintaining public health until 20 April, a date that was extended to 20 May and then to 11 June 2020.
In this context, companies have been faced with various types of problems generated by this new situation which have a significant impact on the running of their activities. Moreover, it should not be forgotten that this crisis coincided with the period for drawing up the annual accounts and the declaration of the result, for companies that close the financial year on 31 December.
On 29 April 2020, the Moroccan National Accounting Council (Conseil National de la Comptabilité – CNC) issued its Opinion No. 13 in response to the request of the Economic Intelligence Committee. This opinion explains certain derogatory accounting treatments justified by the economic and financial impact of the Covid-19 pandemic. The purpose of this article is to describe the various provisions set out in this opinion.
- The methods of valuation and recognition of expenses and losses specifically related to the pandemic and incurred during the financial year ending in 2020:
- Contributions to the special fund for pandemic management
The notice states that these contributions to special fund entitled ” Fund for the Management of the Covid-19 Coronavirus Pandemic” constitute a non-current expense. However, insofar as the impacts induced by these collected contributions will extend beyond the year 2020, the entities concerned have the possibility of transferring the amount of this contribution to the assets side of the balance sheet under the heading “Non-valued assets”. This deferred charges account will have to be spread over a maximum period of 5 accounting years.
This treatment is motivated by the fact that this is a non-recurring one-off expense that may be significant in relation to the financial year 2020 alone. It should be noted that from a tax point of view, these deferred expenses must be spread at a constant rate over 5 financial years.
- Fixed costs for sub-activity
The share of fixed costs related to the sub-activity in relation to the company’s normal production or operating capacity may also be recorded on the assets side of the balance sheet under the heading “Non-valued fixed assets”.
In the opinion of the CNC, the expenses concerned are those borne by the company during the period of total or partial shutdown or slowdown of activity, notably in the form of depreciation of assets, rental expenses, financial expenses, leasing fees, and structural expenses (personnel expenses related to general administration and support functions).
- Effects on the evaluation of risks and charges related to the closing of accounts ;
- Companies that close their accounts on 31/12/2019
Considering that the Covid-19 epidemic is a post-closing event that did not take effect until 2020, assets and liabilities as well as income and expenses are recognized and measured for the years ended December 31, 2019, without taking into account this event and its consequences.
The impact of this event should be indicated in Table II of the ETIC’s C5 statement entitled “Events arising after the year-end, not related to the year and known before the first external communication of the financial statements”.
The information on these events may be of a quantitative or qualitative nature, such as a drop in sales, the closure of production sites, the implementation of restructuring plans, etc.
It is also made at the level of the ETIC mention of all favorable events that can mitigate the effects of the crisis, such as obtaining specific state aid, postponement of tax deadlines, support from financial institutions, etc….
Even if the going concern assumption would be called into question by post-closing events related to the pandemic, such events are only relevant to the information to be mentioned in the ETIC and do not justify the production of accounts in net asset values.
- Companies which close their accounts after 31/12/2019
For entities with a closing date between January 1 and March 20, 2020, and considering that the pandemic is declared on March 20, 2020, post-closing events apply under the same conditions as those closing their fiscal year on December 31, 2019.
For entities whose closing date is after March 20, 2020: Post-closing events must affect the valuation of assets, liabilities, expenses and income and serve the ETIC, if applicable.
Written by Imane BENABOUD Manager TAX