Effects of the Russia–Ukraine War on Financial Reporting

The geopolitical situation in Eastern Europe intensified with Russia's invasion of Ukraine on 24 February 2022. The war between the two countries continues to evolve as military activity progresses and additional sanctions are imposed. In addition to the humanitarian impact on entities operating in, or doing business with counterparties in, Russia, Ukraine or neighbouring countries (for example Belarus), the war is increasingly affecting economies and global financial markets and further worsening the ongoing economic situation. Entities face many challenges, including rising inflation and disruption of global supply chains.

Because of its broader impact on macroeconomic conditions, many entities globally may need to consider the effect of the war on certain accounting and financial reporting matters. The extent to which entities will be or have been affected depends largely on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions and the reaction of global financial markets.

Political events and sanctions are constantly changing and differ around the world. Although this article does not specifically address such actions, it aims to raise awareness of some key effects of the Russia–Ukraine war that entities need to consider.

These include:

• Disruption or suspension of production in affected regions and neighbouring countries.

• Going concern.

• Expected credit losses under TFRS 9.

• Damage to or loss of inventories and other assets (inventory impairment).

• Closure of roads and facilities in affected regions.

• Supply chain and travel disruptions in Eastern Europe.

• Volatility in commodity prices and currencies.

• Disruption of banking systems and capital markets.

• Decline in business sales and earnings in affected regions.

• Increased costs and expenses.

• Cyber attacks.

• Deferred tax calculations.