A lot of effort is being made by governments and businesses to help the Travel, Tourism, and Hospitality industry recover. The travel corridor between the UK and the UAE is proving popular as fewer PCR tests and no quarantine means holidaymakers can make the most of their time off. Perhaps it is also alluring to enjoy Christmas in 25 degrees Celsius sunshine, on the beach.
When will the industry recover?
This does sound encouraging and travel experts expect the travel industry to fully recover in a couple of years. However, several businesses especially the Food & Beverage industry, have found the past year a challenge. Many predict they will be unable to recover from these losses in the year or even two years, ahead.
As finance professionals, be it in practice or industry, there is a cause for concern. Specifically, Going Concern. As we near the end of the fiscal year 2020, audit opinions will have to formed in the coming weeks. This was perhaps, the most economically challenging fiscal period in a while.
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 changing the 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 to ensure that 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 continue to operate as a Going Concern.