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Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
DOI: 10.17747/2618-947X-2021-2-138-149 JEL: M480
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention
M.M. Thottoli1
1 University of Nizwa (Oman)
Abstract
COVID-19 pandemic period impedes business operations and world economic growth. This type of pandemic may happen again in the future. Hence, the objectives of the study are to find out the pandemic effect on items in financial statements; to predict the future effect on items in the financial statements, and to find out the role of government and organizations for future prevention of the adverse effects on financial statements due to the pandemic. The analysis is based on a large number of publicly available sources, including research papers, governmental documents, and reports. The study has taken 8 ratios compared with 80 listed companies around the globe. During the pandemic period the magnitude of adverse effect on business operations depends upon the decision and actions of external bodies (WHO, governments) and internal ones (organizations) parties. The findings revealed that the role of government and organizations for future prevention of 'Pandemic Effect on Financial Statements' is vital to defend against future pandemic situations. This study has added a new discussion to the body of knowledge, i.e. examining pandemic (COVID-19) effect on business operational activities and its financial statements; hence, an approach that is not widely discussed in the previous studies.
Keywords: future prevention, financial statements, government, pandemic, COVID-19.
M.M. Ihottoli М.М. Тхоттоли
BY 4.0
For citation:
Thottoli M.M. (2021). Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention. Strategie Decisions and Risk Management, 12(2): 138-149. DOI: 10.17747/2618-947X-2021-2-138-149.
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
М.М. Тхоттоли1
1 Университет Низва (Оман)
Аннотация
Во время пандемии COVID-19 деловые операции и экономический рост сократились во всем мире. Поскольку пандемии могут снова произойти в будущем, необходимо понимать, какой эффект они оказывают на финансовые показатели выполнения стратегии; как можно определять и прогнозировать будущие эффекты и их влияние на снижение финансовых показателей выполнения стратегии и выявлять роль правительства и организаций в предотвращении негативного влияния на выполнение финансовых показателей стратегии. Анализ основан на большом количестве общедоступных источников, включая научно-исследовательские работы, правительственные документы и отчеты. Эмпирическое исследование основано на анализе восьми ключевых показателей 80 листинговых компаний во всем мире. Результаты показали, что роль правительства и организаций по будущему предотвращению негативных эффектов на финансовые показатели стратегии жизненно важны для защиты от влияния таких эффектов. Новизна исследования заключается в добавлении знаний по влиянию негативных эффектов пандемии (COVID-19) на деловые операции компаний и выполнение финансовых показателей стратегии; кроме того, используемый подход не обсуждался в предыдущих исследованиях и позволит прогнозировать влияние пандемии на выполнение финансовых показателей стратегии.
Ключевые слова: прогнозирование, финансовые показатели стратегии, правительство, пандемия, COVID-19.
Для цитирования:
Тхоттоли М.М. (2021). Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании. Стратегические решения и риск-менеджмент, 12(2): 138-149. DOI: 10.17747/2618-947Х-2021-2-138-149.
1. Introduction
Financial statements include income statements, statements of financial position, cash flow statements, and statements of equity shareholders. If there are no accurate, timely and regular financial statements, even if one who believes that the business
is doing well, the business could not able to achieve their aim [Adrian, 2019; Mathuva et al., 2019]. Cash and profit are considered the lifeblood of any business [Mazzarol, Reboud, 2020]. Fair financial statements are helpful for stakeholders including managers, shareholders, investors, banks, government, tax inspectors, and so on to make the right decision [Davern et al.,
© Thottoli M.M., 2021
13B
M.M. Thottoli М.М. Тхоттоли
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
2019; Weetman, 2019]. The preparation of financial statements is compulsory as a legal requirement [Gahlot et al., 2019; Pelekh et al., 2020]. Unqualified audited financial statements ensure the presence of applicable accounting standards (International Accounting Standards - IAS) [Adrian, 2019; Jatmiko et al., 2019] and Generally Accepted Accounting Principles (GAAPs) [Routh et al., 2019]. These statements are used by different stakeholders for different decision-making [Weetman, 2019; Birt et al., 2020]. Concepts and a clear understanding of accounting, financial statements, and budgeting [Reichard, Kuchler-Stahn, 2019] helped take the right decision at the proper time in order to direct the business towards its financial success [Birt et al., 2020].
Governments, income tax departments, security exchanges compel companies to prepare their financial statements on a quarterly basis [Mao, Wu, 2019] that might use company management to guide and control future financial requirements [Kajuter et al., 2019]. The COVID-19 pandemic impeded business operations [Koonin, 2020] and economic growth [Barro et al., 2020] around the world and it continues as a universal phenomenon [Crank et al.,
2019]. Since the universe has faced many diseases in pandemic scales, it badly affects major business operational activities [Koonin, 2020]. It is obvious that the pandemic, say, novel coro-navirus has been controlled by many countries [Wu, McGoogan,
2020], a lot of measures have been taken by both government (external) and business organizations (internal) [Zhang et al., 2020]. The measures taken by both external and internal bodies of such countries as Italy, the United States, Spain, Germany, France, and Iran have not limited the spread of COVID-19 among citizens [Zhou et al., 2020]. Pandemic leads to lockdowns in many countries that impede business operations [Kruger et al., 2020]. Still pandemic has less affected some businesses like food and pharma industries. This set of nosy challenges calls researchers to study the role of governments and organizations regarding financial statements according to the industry. Hence the objectives of the study are to find out the role of governments and organizations for future prevention, 'pandemic effect on financial statements, based on comparing current quarterly/yearly financial statements with previous ones in industries/organizations; and to predict the future effect on such organizational financial statements. Later, financial statements were compared to the pandemic effect on the economy that highlights the role of governments and organizations for future prevention.
Fig. 1. Schematic diagram of research framework
Рис. 1. Принципиальная схема структуры исследования
The study has proposed an innovative framework in which it defined four major independent variable measures taken by external bodies (governments, WHO), internal institutions (organizations), scientific and controlled measures, unscientific and uncontrolled measures that affect dependent variables (business operational activities and financial statements). The current study chose these four essential independent elements (factors) to represent the characteristics for certain reasons. These are all the important factors influencing business operations as well as financial statements in general. Hence the following theoretical framework has been developed. The relationship measures taken by external bodies (governments), internal institutions (organizations), scientific and controlled measures, unscientific and uncontrolled measures with business operational activities and Financial Statements are shown in fig. 1.
2. Literature review
Comparative or common-size income statement and statement of financial position help to understand the causes of differences in operational financial performance between two periods [Dinner et al., 2018; Salma, Hussain, 2018; Robinson, 2020] and can be used to predict future trend [Chen et al., 2018; Linares-Mustarös et al., 2018; Hosaka, 2019]. Accounting ratios and trend analysis can be used for more threadbare and predicted future analysis [Jayasekera, 2018; Le, Viviani, 2018; Linares-Mustarös et al., 2018; Bateni, Asghari, 2020]. Comparing financial statements with two periods helps to prepare forecasted financial statements [Hasanaj, Kuqi, 2019; Henry et al., 2020; Thottoli, 2021a; 2021b]. An effective analysis of financial statements leads to understanding the value of a business. [Ani, Odo,
2019] analyzed current financial statements to predict the profitability and risk of an organization [Kamar, Fatihah, 2018; Waqas, Md-Rus, 2018; Ali, Puah, 2019; Campbell et al., 2019]. Effective analysis of financial statements helps to assess the quality of the firm's financial statements [Cantele, Zardini, 2018; Muda et al., 2018; Robinson, 2020]. Financial statement analysis helps to understand the operational performance of any company [Marjano-vic et al., 2018]. Identifying industry and economic characteristics is possible using the analysis of financial statements [Müller et al., 2018]. The interim financial report predicts future effect on organizational financial statements [Nainggolan, 2018].
In normal economic conditions, most successful organizations continue to operate their business the same or better way. It has been found that organizational operational activities are adversely affected during the outbreak of any pandemic, which is now a normal phenomenon in every decade [Bhardwaj, 2020]. Pandemic will negatively affect organizations' operational, financial, and revenue aspects [Williams, Kayaoglu, 2020]. The task of organizations is to take all the necessary measures to prevent pandemic situations, and it depends on the governments and tax authorities' situational decisions/actions through implementing emergency rules/decrees/orders [Di Saverio et al., 2020; Saleh et al.,
2020]. The governments with reserve banks may implement supportive financial measures to overcome adverse economic consequences especially during a pandemic such as a Coronavirus disease 2019 [Adams, Walls, 2020]. Since pandemic is a social and communal influential factor, the organization and its employees
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
should also take scientific and controlled measures to eliminate such situations within a short period of time [Alabdullah et al., 2020; Cirrincione et al., 2020; Tan et al., 2020].
2.1. Business operational activities and financial statements
Business operational activities are the core daily routine that an organization needs to pay attention to in order to get revenues. Manufacturing or production, selling, administration, marketing [Thottoli, Thomas, 2021], customer services are some of the operational activities of any organization. Well-planned operational activities help organizations to achieve better cash flows and to maintain and/or increase the net income of the business. Financial statements help make smart business move and keep value and reputation [O'Brien, 2019]. Financial statements are the basis to get a loan or attract investors. Thus, it is important for any business to keep an eye on its operational activities much better than before. Operational activities are the principal revenue-producing activities [Hasanaj, Kuqi, 2019; Yosvid, 2020].
2.2. Scientific and controlled measures taken by external (governments and WHO)
Social awareness is considered to be the first step that government has to take as an initiative. Basic facilities such as food, masks, soap, sanitation materials and so on should be provided at the grass root level by the government especially to the underprivileged and downtrodden living in slum areas. Healthcare and adequate testing facilities in every ward in the country need to be provided by the local government or authorities. Governments should take an initiative to identify and isolate violators whenever required using strict policy. After all strict follow-up action against the lockdown, violators are to be followed up. Stay-at-home orders, business closures, and travel restrictions are brought in by heads of health emergencies to counteract the spread of COVID-19. WHO is currently taking precautionary measures/advice to protect people from the spread of COVID-19. Interventions, such as intensive contact tracing followed by quarantine and isolation, can effectively reduce the spread of COVID-19. Under the most restrictive measures, the outbreak is expected to peak within two weeks (since January 23, 2020) with a significantly low peak value. With travel restrictions (no transportation of exposed individuals to Beijing), the number of infected individuals in seven days will decrease by 91.14% in Beijing, compared to the scenario of no travel restriction. Collaborative efforts are required to combat the novel coronavirus, focusing on both persistent strict domestic interventions and vigilance against exogenous imported cases. Community-wide containment is an intervention applied to an entire community, city, or region, aimed at reducing personal interactions, except for minimal interaction to ensure vital supplies. From a policy perspective, understanding whether and how communities respond to government actions is crucial. Socialization of coronavirus in the USA reveals that fear about the pandemic disease has taken initiatives from the governmental side to the society and general people, placing pressure among prospective customers and heading to regulatory reaction and a substantial societal backlash [Andriani, 2020; Brammer et al., 2020]. These measures help return to the normal situation which
M.M. Thottoli М.М. Тхоттоли
will, in turn, help increase the turnover of the business. These scientific and controlled measures taken by the governments and WHO can lead to the economic growth in short term. Hence, it is hypothesized that:
H1: During pandemic period scientific and controlled measures taken by external bodies (governments and WHO), adversely affect business operational activities and financial statements.
2.3. Unscientific and uncontrolled measures taken by external (governments & WHO)
Research on China and South Korea shows, that early governmental action and cooperation with the population can slow down the uncontrolled spread of the pandemic. A weak approach of government to control the pandemic may lead to communal spreading. Improper measures at the initial stage by the government may lead to the spreading of the virus in the society. Poorly tested facilities are another inability of the country to control the spreading of the virus. A situational communication/instruction of good health and safety measures during the pandemic period is important to avoid the spread of such viruses. The measures should be taken by local/state/health organizations as soon as possible before spread of the disease in the community. This can be evident that in countries like the UK and the the US, the governments were swift to institute scientific controlled measures to alleviate corporate debt [Amankwah-Amoah et al., 2021]. Hence, it is hypothesized that:
H2: During the pandemic period unscientific and uncontrolled measures taken by external bodies (governments and WHO) adversely affect business operational activities and financial statements.
2.4. Scientific and controlled measures taken by internal institutions (organizations)
To sustain and thrive in uncertain times brought forward by COVID-19, organizations must explore new ways of cooperation. This has placed a spotlight on the need for corporate resilience and the ability to embrace virtual collaboration tools and practices. The researcher has observed that most of the companies have to require digital technologies to reduce office hours. It is not necessary for organizations to operate with a 100 percent presence of employees. They have implemented social distancing and quarantine measures. The staff is working from different locations, either in the office or at home. Staff members who have returned from abroad or who have even mild cold symptoms are working from home for a minimum of 14 days. All business trips are suspended. Digital tools for internal and external meetings are used, and reception of visitors is stopped. Public events and seminars are not organized. This makes the companies remain operational and continue making disbursements to its customers. It is necessary to follow recommendations published by WHO. Ban on lunch breaks to avoid crowds has been introduced. Masks and hand sanitizers should be given to all employees. Close and constant monitoring of international developments, including instructions issued by relevant local and national authorities should be observed. Internal task forces in the areas of operations, business, and general crisis management were formed. This continues to operate
M.M. Thottoli М.М. Тхоттоли
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
a business without much disturbance [Untaru, Han, 2021]. It was found out that the scientific and controlled measures taken by organizations against the COVID-19 virus positively affected both customer safety and business operations. Hence, it is considered that:
H3: During pandemic period scientific and controlled measures taken by internal (organization), adversely affect business operational activities and financial statements.
2.5. Unscientific and uncontrolled measures taken by internal institutions (organizations)
An effective Business Continuity Management (BCM) program is a critical component of successful business management. Experience shows that typically over 50 percent of businesses without an effective business continuity plan will ultimately fail following a major disruption. Thermal screening is mandatory for all the staff. If there are no strategies using a cost-effective approach, and without taking into consideration key resources or critical activities, people, Information Communication Technology (ICT), supplies, and facilities may adversely affect business operations. Product packing and production information should be looked into if it is necessary. Unreasonable dismissal of an employee who has care-giving obligations related to COVID-19 may spoil business. Not providing employees with adequate resources to work from home is another key area. Many organizations are now requiring their staff to work from home, which can further increase the risk as enterprise network security safeguards are not always available to home-users, and some users may be forced to use their systems at home that may not have the same level of protection. Despite the working conditions, employees must be especially vigilant right now for malicious attacks that attempt to exploit the pandemic and people's fears. This is important for both working in the office and at home. This concept has been supported by [Hu et al., 2021]. The researchers expressed the idea that failure to obey COVID-19 organizational protection measures may jeopardize the health and protection of employees, business operations, and the public. Hence, it is hypothesized that:
H4: During pandemic period unscientific and uncontrolled measures taken by internal institutions (organizations), adversely affect business operational activities and financial statements.
Fig. 2. Region & Industry classification for analysis Рис. 2. Классификация регионов и отраслей для анализа
3. Methods
The analysis is based on a large number of publicly available sources, including research papers, government documents, and reports. The paper aims to triangulate the validity of the data with multiple sources. The study has taken 8 ratios compared with 80 listed companies around the globe. Further, as a part of the methodology, the current study has used secondary data after considering organizations' current quarterly financial statements with previous ones to reach the predicted financial results. This result has later been cross-compared with pandemic (COVID-19) affected (according to the data of COVID-19 statistics provided by World Health Organization - WHO) economies. Organizations were grouped geographically as well as industry types. During the pandemic period, the magnitude of adverse effect on business operations depends upon the decision and actions of external bodies (WHO, governments) and internal institutions (organizations).
In this study, industries were grouped under essential (Group A) and non-essential (Group B) during the pandemic. Food and Pharma (Industry I) industries are grouped as essential industries whereas Automobile and Textile (Industry II) industries are grouped as non-essential industries during the pandemic period. For industry sample selection, the regions were segregated ac-
Table 1
List of accounting ratios used as variable Таблица 1
Коэффициенты, используемые в качестве переменных
Ratio class Ratio name Notation Formula
Gross Profit Ratio GPR Gross profit/revenue
Operating Profit Margin OPM Operating profit/revenue
Profitability ratios Net Profit Ratio NPR Net profit/revenue
Return on assets ROA Net income/average assets
Return on Capital Employed ROCE Avg. capital employed/net profit
Liquidity Ratio Current Ratio CR Current assets/current liabilities
Acid Test (Quick) Ratio ATR Quick assets/current liabilities
Source: [Olson, Zoubi, 2008].
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention M.M. Thottoli
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании М.М. Тхоттоли
Table 2
COVID cases comparison (WHO Region) Таблица 2 Сравнение случаев COVID
Group WHO Region Confirmed Cases Percentage (%)
Group A Region Americas 3084517 47 81
Europe 2211148 34
Eastern Mediterranean 587030 9 19
Group B Region Southeast Asia 322863 5
Western Pacific 188393 3
Africa 121104 2
Total 6515796 100
Sources: calculated by the author as per the data (WHO Coronavirus Disease (COVID-19) Dashboard, Data last updated: 2020/6/5, 10:41 am CEST).
Fig. 3. COVID cases comparison (WHO Region) Рис. 3. Сравнение случаев COVID
Fig. 4. WHO coronavirus disease (COVID-19) dashboard, Data last updated: 2020/6/5, 10:41 am CEST Рис. 4. Информационная панель ВОЗ по заболеванию коронавирусом (COVID-19), последнее обновление данных 2020/6/5
Source: https://www.who.mt/emergencies/diseases/novel-coronavi-rus-2019/advice-for-public.
Fig. 5. WHO coronavirus disease (COVID-19) dashboard,
Data last updated: 2020/6/5, 10:41am CEST1) Рис. 5. Информационная панель ВОЗ по заболеванию коронавирусом (COVID-19), последнее обновление данных 2020/6/5
в ComfMilivn
Dn iky Слт
Source: https://covid19.who.int/?gclid=EAIaIQobChMI_M3Cutrq-6QIVCIBQBh2BkQVREAAYASAAEgKSY_D_BwE.
cording to groupings made by WHO based on COVID-19 confirmed cases (fig. 1 and fig. 2). Americas and Europe appeared as one group, Group A Region, and rest of the region (Southeast Asia, Western Pacific, and Africa) formed another group, Group B Region. The study investigates two industries in each region, where 20 companies in every industry were taken as a sample, and the total number consists of 80 companies. The sample for the study has limited to 80 since there is not enough published financial information during the current study.
3.1. Variables of the research and its measurements
This study has used various measurements (accounting ratios) as variables for assessing the financial performance of any organization (fig. 2 and table 1, list of accounting ratios used for the analysis [Olson, Zoubi, 2008]):
The paper also takes impairment of assets of various selected companies for comparative analysis.
Fig. 6. WHO coronavirus disease (COVID-19) dashboard,
Data last updated: 2020/6/5, 10:41 am CEST) Рис. 6. Информационная панель ВОЗ по заболеванию коронавирусом (COVID-19)
Source: https://covid19.who.int/?gclid=EAIaIQobChMI_M3Cutrq-6QIVCIBQBh2BkQVREAAYASAAEgKSY_D_BwE.
1 https://covid19.who.int/?gclid=EAIaIQobChMI_M3Cutrq6QIVCIBQBh2BkQVREAAYASAAEgKSY_D_BwE. Date of access: 5-6-2020.
M.M. Thottoli М.М. Тхоттоли
4. Results and discussion
As per the WHO COVID-19 dashboard, there are 6,515,796 confirmed cases reported around the world at the time of this study (2020.06.05). Among them, 3,084,517 confirmed cases (which is around 47%) are widespread in Americas and 2,211,148 confirmed cases (which are 34%) exist in Europe. Hence, 81% of confirmed cases are in Group A Region. Whereas remaining 19% confirmed cases are from Group B Region (table 2, fig. 3-6).
The findings show a high spread of the virus in Group A Region in comparison to Group B Region. 81% confirmed cases fall under Group A Region, whereas 19% confirmed cases are under Group B Region. This result depends on the measures taken by external (governments) and internal organizations. Unscientific/uncontrolled measures taken by Group A region lead to spreading of virus whereas scientific/controlled measures taken by Group B region resulted in low spread of the virus.
4.1. Group A & Group B, Industry I
Group A region (Americas and Europe) and Group B (Southeast Asia, Western Pacific, and Africa) region, considering 20 selected companies from each Group under Industry type I (essential products such as food and pharma), showed a comparative result as discussed below:
Table 3, Gross profit Ratio (Group A, Industry I and Group B, Industry I) does not show many variations in Industry I in both regional groups.
The result shows that the industries producing essential products such as food and pharmaceuticals have not faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company was keeping stable gross profit in comparison to Q 2020 and Q 2019.
Table 3, Operating profit margin (Group A, Industry I and Group B, Industry I) does not show many variations in Industry I in both regions A and B.
The result prooves that the industries producing essential products such as food and pharmaceuticals have not faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company was keeping a stable operating margin in comparison to Q 2020 and Q 2021.
Table 3, Net profit margin (Group A, Industry I and Group B, Industry I) shows slight variations in Industry I in both regions A and B.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore,
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
Table 3
Group A & Group B, Industry I Таблица 3 Группы А и В, отрасль I
the company could not be able to keep a stable net profit margin in comparison to Q 2020 and Q 2019.
Table 3, Return on assets (Group A, Industry I and Group B, Industry I) shows a decreasing trend in Industry I in region B in comparison to region A.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced negative effects on their business operational activities as well as their financial statements. Therefore, the company could not be able to keep a stable return on assets in comparison to Q 2020 and Q 2019.
Table 3, Return on capital employed (Group A, Industry I and Group B, Industry I) shows a decreasing trend in Industry I in region B in comparison to region A.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company could not be able to keep a stable return on capital employed in comparison to Q 2020 and Q 2019.
Table 4, Current ratio (Group A, Industry I and Group B, Industry I) shows no much variations in Industry I in both regions A and B.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company could not be able to keep stable current assets in comparison to Q 2020 and Q 2019.
Table 4
Group A & Group B, Industry I Таблица 4 Группы А и В, отрасль I
GnqiA, hmhtiry I
("тшф A Irahtstry I
Graft В, НмЬгЛу I
Стшф A, Inbshy I Grongi B, tafashy I
Company Current Ratio (Ql,'19) (Ql/20) Current Ratio <Q1,19) (Q1.20) Acid Test Ratio (QI,'19) (Ql/20) Acid Test (Quick) Ratio Working Capital Ratio (Q1,'I9) (Ql,'20) (Ql,'19) (Ql,'20) Working Capital Ratio (Q1,'I9) (QI,'2Q)
1 0.86 1.10 4.79 3.54 084 109 4.20 3 00 О 04 0.03 8 00 5 56
2 1.03 1.48 1.43 1.46 0.97 1.45 0.78 1.27 ООО 0.04 ООО ООО
3 0.50 0.53 1.28 1.32 0.33 0.39 l.Ol 1.02 -0.12 -0.12 0.28 0.25
4 IOS 0.99 2.14 2.19 0.65 0.70 0 96 1.06 O.Ol ООО 1.14 1.26
5 1.50 1.58 0.76 0.93 0.83 0.98 0.48 0.61 0.08 0.10 ООО 0.00
6 1.38 1.94 4.79 447 0.77 1.23 4.20 3 84 028 048 800 7.75
7 1.73 1.67 1.43 0.52 1.33 1.36 0.78 0 39 0.10 0.10 O.Ol 0.16
S 0.62 0.66 1.28 2.18 0.32 0.35 1.01 1.81 -0.10 -0.06 G.31 0.92
9 098 1.59 2.14 1.63 083 1.42 096 085 ООО 009 1.12 096
10 1.20 1.31 0.76 0.22 0.65 080 0 48 0.18 0 04 0.07 ООО ООО
11 0.38 1.03 4.79 4.0Q 0.66 0.78 4.20 3.37 0.03 O.Ol 0.77 0.64
12 1.26 1.31 1.43 33.46 1.01 1.05 0.78 29 87 006 0.07 0.49 0.32
13 3.10 3.04 1.28 188 3.01 2.92 l.Ol 1.76 0.33 0.30 0.19 045
14 1.44 1.59 2.14 3.01 1.16 1.28 0 96 1.00 0.09 0.11 0.76 2 20
15 4.47 3.83 0.76 1.98 4.26 3.62 0.48 1.44 0.23 0.22 ООО ООО
16 3.18 3.14 4.79 3.78 306 3.03 4.20 3.18 038 0.39 OSO 0.62
17 1.72 1.73 1.43 1.19 1.56 1.54 0.78 0.90 0.13 0.13 О 89 086
18 8.24 4.54 1.28 3.41 8.13 4.49 l.Ol 2.95 0.66 0.57 0.22 0.78
19 2.94 3.31 2.14 3 59 2.78 3.16 0 96 3.17 0.27 0.33 0.25 0.32
20 5.35 8.31 0.76 4.77 4 90 7.75 О 48 4.50 0.66 0.76 О.ЗЗ 0.09
Cakntocdbythe шшмти-
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
M.M. Thottoli М.М. Тхоттоли
Table 4, Acid test (Quick) ratio (Group A, Industry I and Group B, Industry I) shows a decreasing trend in Industry I in region B in comparison to region A.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company could not be able to keep stable quick assets in comparison to Q 2020 and Q 2019.
Table 4, Working capital ratio (Group A, Industry I and Group B, Industry I) does not show many variations in Industry I in both regions A and B.
The result proves that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore, the company could not be able to keep stable working capital in comparison to Q 2020 and Q 2019.
Table 5, Impairment of assets (Group A, Industry I and Group B, Industry I) shows an increasing trend in Industry I in region B compared to region A.
The result shows that the industries producing essential products such as food and pharmaceuticals have faced adverse effects on their business operational activities as well as their financial statements. Therefore, the companies are having impairment of assets at a higher rate compared to Q 2020 and Q 2019.
Results of the tested hypothesis
Scientific and controlled measures taken by external bodies (governments and WHO), adversely affected business operational activities and financial statements. Scientific and controlled measures taken by internal institutions (organizations), negatively affected business operational activities and financial statements. Therefore, H1 and H3 are supported.
Table 5
Group A & Group B, Industry I Таблица 5 Группы А и В, отрасль I
Ггпмф A, Inifaisliy I Г|Г«ф В, Inikistry I
1шар aire ment of Iuiapairenient of Assets (Change Assets (Change
CampüQY (Ol,'2D) (Ol,70)
1 46.15 0.0
2 3.98 -12.5
3 -2000 9 6
4 4.81 -10.0
S -0.45 0.0
6 1.96 20.0
7 11 11 ОО
S 16.67 8.4
9 100.00 -30.0
10 20.00 20.0
11 73 33 -410
12 -0.64 3.4
13 11.11 -3.6
14 0.00 20.0
IS lOOOO -23 6
16 0.00 -20.0
17 -9.80 0.0
IS 13.33 7.2
19 ООО -10
20 952 S3
4.2. Group A and Group B, Industry II
Group A region (Americas and Europe) and Group B (Southeast Asia, Western Pacific, and Africa) region, results of 20 selected companies from each Group A and B in Industry type II (non-essential products such as automobiles and textile products), showed a comparative result as discussed below:
Table 6, Gross profit ratio (Group A, Industry II and Group B, Industry II) shows that there is a slight adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobiles and textile products have faced adverse effects on their business operational activities as well as their financial statements in region A (badly affected by virus, COVID-19). Therefore, the company could not keep a stable gross profit in comparison to Q 2020 and Q 2019.
Table 6, Net profit margin (Group A, Industry II and Group B, Industry II) shows that there is highly adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential products such as automobiles and textile have faced negative effects on their business operational activities as well as their financial statements in region A. Therefore, the company could not keep a stable net profit margin in comparison to Q 2020 and Q 2019.
Table 6, Net profit ratio (Group A, Industry II and Group B, Industry II) shows that there is highly adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential products such as automobiles and textile have faced adverse effects on their business operational activities as well as their financial statements in region A. Therefore, the company could not keep a stable net profit in comparison to Q 2020 and Q 2019.
Table 6, Return on assets (Group A, Industry II and Group B, Industry II) shows that there is highly adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobiles and textile goods have faced adverse effects on their business operational activities as well as their financial statements in region A. Therefore, the company could not get a stable return on assets in comparison to Q 2020 and Q 2019.
Table 6
Group A & Group B, Industry II Таблица 6 Группы А и В, отрасль II
Gram A. Industry II Gram B, Industry II &Яф A. Imkistry II &Яф В. Imkistry II Grot^i A. Imkistry II &041 B. Imkistry II &Яф A. Industry II &Яф В. Industry И Gram A. Industry II Gram B, Industry II
Calnted by the шЛмя as per the ibrfa from Slock s дпН stock exchanges fr om
Ешире.
5.56 0.49 20.23 S.96 60.51 35.53 25.59 36.51 60.51 60.51 35.53 35.53 60.51 S.96 60.51 60.51 35.53 S.96 S.96
nuiii xxanu uiuss Profit Ratio Net Profit Margin Net Profit Margin Net Profit Ratio Net Profit Ratio Return on Assets Return on Assets Return on Capital El Return on Capital (Ql,*19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20) (Ql,'19) (Ql,'20)
22.22 107.53 50.04 4.25 6.59 19.67 88.06 89.24 2.10 37.42 19.42 88.20 46.12 3.67 34.03
19.42 87.85
30.43 3.15
21.77 108 34 5102 5 45 37.09 19 43 8608 1462 3 85 640 2 16 102 76 32 82 495 37.17 13 02 95 50 3646 4.40
5.82 6.77 15.95
-23 98 8.29 -0.78 -43 09 -19 23 6.63 16.79 -43.09 -45 15 -31 32 -41.31 -45.15 100 -45 15 -59 70 -19 23
1.77 3.67 3.66
6.03 0.06 36.92
17.65 3.67 4.67 1.75
-4.41 3.93
35.66
127 -7442 490 4 57 22 50 3 99 -O.Ol 1.82 495 2 22 058
4.44 1.71
-2.61 -21.87
6.24 5.66
2.44 -11.20
-2.61 -50.30
1.52 -17.96
4.98 4.83
1.70 3.22
-2.49 -50.28
-2.49 -52.75
1.52 -24.00
1.52 -47.61
-2.49 -52.34
2.44 -16.50
-2.49 -52.75
-2.61 -50.21
1.52 -17.96
2.44 -15.55
2.44 -11.98
1.86 0.41
8.21 2.15 -0.21
0.00 0.40 0.68 2.46
0.79 -0.54 0.36 0.91 1.99 -0.52 -0.52 0.36 0.36 -0.52 0.79 -0.52 -0.54 0.36 0.79 0.79
0.59 -6.86 136 -2 89 -7.42 -3 15 0.83 0.51
2.31 -2.11 0.66 0.00 2.16 2.66 -O.Ol 0.58 0.00 0.91 2.31 0.00 0.17 0.00 0.64 1.27 0.92 0.50 0.00
2.62 -0.67 -0.67
0.66 -10.53 -11.05 04 G?? 04 -0.50 67 -10.96 91 -7.93 67 -11.05 79 -43.12 04 0 25
1.91
8.01
-O.Ol 1.17 0.00 2.89 60.65 0.00 0.34 0.00 2.04 33.27 1.22
127 -0 12 3.25 ООО 095 OlO -033 157 ООО 0 27 090 -029 174 ООО 113 090 036 3 24 ООО
M.M. Thottoli М.М. Тхоттоли
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
Table 6, Return on capital employed (Group A, Industry II, and Group B, Industry II) shows that there is highly adverse variation among Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobiles and textile goods have faced adverse effects on their business operational activities as well as their financial statements in region A.
Therefore, the company could not get a stable return on capital in comparison to Q 2020 and Q 2019.
Table 7, Current ratio (Group A, Industry II and Group B, Industry II) shows that there is highly adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobiles and textile goods have faced adverse effects on their business operational activities as well as their financial statements in region A. Therefore, the company could not be able to maintain adequate current assets in comparison to Q 2020 and Q 2019.
Table 7, Acid-test (Quick) ratio (Group A, Industry II and Group B, Industry II) shows that there is highly adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobiles and textile goods faced adverse effects on their business operational activities as well as their financial statements in region A. Therefore, the company could not be able to maintain adequate quick assets in comparison to Q 2020 and Q 2019.
Table 7, Working capital ratio (Group A, Industry II and Group B, Industry II) shows that there is slight adverse variation in Industry II in region A compared to region B.
The result shows that the industries producing non-essential items such as automobile and textile goods face adverse effects on their business operational activities as well as their financial statements in region A.
Therefore, the company could not be able to maintain adequate working capital in comparison to Q 2020 and Q 2019.
Table 7
Group A & Group B, Industry II Таблица 7 Группы А и В, отрасль II
СпяфЛЬЛБИуП Вд ЬмЬк&у П &дщ| A, Ьиккиу П Бляф В, bMfasdy П &дщ| А, ЪикЕНу П Gfoqi В, ЬЛенг П
Table 8
Group A & Group B, Industry II Таблица 8 Группы А и В, отрасль II
Скиф A, Inihistiy П GnqiB, Iuhstryll
Iniapaireiiient of Ihiapaireinent of
Assets (Change %) Assets (Change
Company Change % <Q1,'20) Change % (Ql/20)
I 10.0 -17.0
2 -15.5 -30.6
3 400.0 0.0
4 50.0 10.7
5 0.0 -2.0
6 7.3 -1.0
7 S 90.0 -2.3 -60S 0.0
9 0.0 200
10 248 -2.0
11 76.0 300
12 6617 -13 0
13 200.0 0.0
14 122.0 10.0
15 1.0 -2.0
16 8.5 70.0
17 11.1 13.1
IS -4.2 40.0
19 0.0 66.0
20 24.8 -1.0
CalcrtÉEd by the айшг as pa the ikáa hum Stuck
Company Current Ratio (Ql/19) (Ql/20) Current Ratio (QI/19) (Ql/20) Vcid Test (Quick) Rati* Acid Test (Quick) Ratio Working Capital RatWorking Capital Ratio (Ql/19) (Ql/20) (Ql,'19) (Ql,'20) (Ql/19) (Ql/20) (Ql/19) (Ql/20)
1 0.03 0.05 127 1.36 0.03 0.05 0.28 0.42 -0.65 -0.64 -0.58 0.07
2 1.37 1.29 1.28 1.57 1.10 1.04 0.87 1.10 0.14 0.12 -0.51 0.14
3 1.33 1.42 2.91 489 0.87 0.91 2.19 4.31 Oll 0.14 -0.71 0.19
4 1.65 1.76 1.42 1.55 1.53 1.64 0.53 0.63 0.16 017 -0.51 0.13
5 1.69 217 146 2.23 1.47 1.92 1.24 196 0.24 0.34 -0.58 0.22
6 1.55 1.32 1.27 097 1.02 088 0.28 -016 0.13 009 -0.67 -0.18
7 1.34 1.06 1.28 2.47 0.72 0.51 0.87 1.52 0.07 0.02 -0.86 0.11
8 1.63 1.61 2.91 5.74 0.79 084 2.19 469 0.13 0.13 -0.92 0.18
9 3.05 3.33 1.42 0.85 2.58 2.74 0.53 -0.92 0.28 0.29 -0.35 0.07
10 1.55 1.31 1.46 3.12 1.02 0.80 1.24 2.80 0.13 0.09 -1.21 0.10
11 0.03 0.04 1.27 1.53 0.03 0.04 0.28 0.61 -0.03 -0.04 -0.68 0.06
12 1.37 1.08 1.28 2.47 1.10 0.73 0.87 1.51 0.16 0.05 -0.89 0.10
13 1.33 0.93 2.91 7.13 0.87 -0.48 2.19 6.68 0.13 -0.04 -1.95 0.10
14 1.65 0.88 1.42 1.44 1.53 0.67 0.53 -0.49 ООО 0.00 -0.60 0.07
15 1.69 1.60 1.46 1.33 1.47 0.76 1.24 1.07 0.24 0.22 -0.62 0.03
16 1.55 1.19 1.27 1.43 1.02 0.69 0.28 0.41 0.13 0.06 -0.62 0.07
17 1.34 0.75 1.28 1.87 0.72 0.21 0.87 0.99 0.00 0.00 -0.65 0.11
18 1.19 1.09 2.91 406 0.58 1.01 2.19 1.81 0.22 0.78 -0.74 0.16
19 3.05 1.52 1.42 1.39 2.58 О79 0.53 -0.12 0.25 0.32 -0.58 0.07
20 1.55 1.19 1.46 16.71 1.02 0.69 1.24 16.38 0.33 0.09 -6.22 0.12
Emiiie-
Table 8, Impairment of assets (Group A, Industry II and Group B, Industry II) shows that there is a high increase in variation in Industry II in region A compared to region B.
The result shows that the majority of the industries producing non-essential items such as automobile and textile goods faced adverse effects on their business operational activities as well as their financial statements in region A. Therefore, the companies are facing impairment of assets at a higher rate in comparison to Q 2020 and Q 2019.
Unscientific and uncontrolled measures taken by external bodies (governments & WHO), adversely affect business operational activities and financial statements. Unscientific and uncontrolled measures taken by internal institutions (organizations), negatively affect business operational activities and financial statements. Therefore, H2 and H4 are supported. Thus, the findings revealed that during the pandemic as a phenomenon, the measures taken by external bodies (governments, World Health Organization (WHO)) and internal institutions (organizations) play a vital role in the degree of repercussion effect in economic and business operations and they will, in turn, affect organizational financial statements.
5. Conclusion
Based on the results of the research and discussion, it can be concluded that the measures taken by external bodies (governments, World Health Organization (WHO)) and internal institutions (organizations) play a vital role in the degree of repercussion
Pandemic (COVID-19) effect on financial statements: The role of government and organizations for future prevention
Влияние пандемии (COVID-19) на финансовые показатели: роль правительства и организаций в предотвращении негативного влияния на стратегию компании
effect in economic and business operations and they will, in turn, affect organizational financial statements during the pandemic period.
Thus, this study has obtained unique findings as compared to previous studies. Furthermore, such a research in the field of pandemic effects on financial statements provides novelty in the world literature. This is thanks to the knowledge of the researchers; there was no empirical study that combined these variables and evaluated their empirical significance. The findings confirmed that there is a positive relationship between four hypothesis. Scientific and controlled measures taken by external bodies (governments and WHO), low adversely affected business operational activities (revenues, manufacturing/production, inventory, expenses) and financial statements (profitability, liquidity, impairment of assets, wealth and dissolution). Scientific and controlled measures taken by internal institutions (organizations) adversely affected business operational activities (revenues, manufacturing/production, inventory, expenses) and financial statements. Unscientific and uncontrolled measures taken by external bodies (governments and WHO) adversely affected business operational activities and financial statements (profitability, liquidity, impairment of assets, wealth and dissolution). Unscientific and uncontrolled measures taken by internal institutions (organizations) adversely affected business operational activities and financial statements towards business operational activities (revenues, manufacturing/production, inventory, expenses) and their financial statements (profitability, liquidity, impairment of assets, wealth and dissolution). The findings also suggest the role of governments and organizations for future prevention of 'Pandemic Effect on Financial Statements' that can be relied upon to fight with future pandemic situations.
In the future, even small and medium enterprises can also incorporate automated accounting software [Muneerali, 2020; Thottoli, 2020] to set aside a provision for such future pandemic contingencies. Information communication technology (ICT) enabled auditing to help professional auditors examine those statutory provisions on pandemic in any organization [Thottoli et al.,
M.M. Thottoli M.M. TxoTTonu
2019a; 2019b; 2019c; Thottoli, Thomas, 2020; Thottoli, 2021c; 2021d].
6. Significance of the study
This study is the first to suggest strengthening economic stability for a country during a pandemic era. Since pandemic is a universal disease which has already happened many times -smallpox, tuberculosis, plague, influenza pandemic, flu pandemic (H1N1), HIV/AIDS and current coronavirus pandemic. This pandemic impedes business operations and economic growth around the world as a universal phenomenon; governments and WHO are required to take well-organized scientific/controlled measures. This may help the government to keep statutory money reserve for coping with pandemic situations in the future. For example, the government keeps a certain budgeted amount for defense. Further, we can think of the various organizations to keep an adequate statutory reserve for facing such pandemic situation in the future, as well as this current study may assist the policymakers in various world organizations, ministry of health and governments, in particular, to implement wise and deliberate policies that can cope with a future pandemic situation.
7. Limitations and future research
The key goals established for this research were the identification of the factors that affect business operational activities during the pandemic period. However, this research has not touched upon the cultural aspects of each country that might be a barrier to implement strict governmental rules and policies. This study has considered four types of industries, moreover it can be applied for other types of industries too. Further research is necessary to extend and replicate this study to cultural and other spheres - geographical and economic environments to provide this wider support.
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About the author
Mohammed Muneerali Thottoli
PhD, lecturer at the University of Nizwa (Oman). Scopus Author ID: 57214318109, Researcher ID AAR-8987-2021, ORCID: https:// orcid.org/0000-0003-2195-7226.
Research interests: accounting, auditing, ERP, entrepreneurship, fintech. muneerali@unizwa.edu.om
Информация об авторе
Мохаммед Мунеерали Тхоттоли
PhD, преподаватель, Университет Низва (Оман). Scopus Author ID: 57214318109, Researcher ID AAR-8987-2021, ORCID: https://orcid.org/0000-0003-2195-7226.
Область научных интересов: учет, аудит, ERP-системы, предпринимательство, финансовые технологии. muneerali@unizwa.edu.om
Статья поступила в редакцию 21.10.2021; после рецензирования 2.11.2021 принята к публикации 10.11.2021. Авторы прочитали и одобрили окончательный вариант рукописи.
The article was submitted on 21.10.2021; revised on 2.11.2021 and accepted for publication on 10.11.2021. The authors read and approved the final version of the manuscript.
