As the coronavirus outbreak wreaks havoc on businesses across the country and throughout the world, financial statement preparers and CPA practitioners must continue to fulfill their financial reporting duties.
Regardless of the changing environment, businesses need to make sure the information presented on their financial statements is reported in accordance with generally accepted accounting principles (GAAP). However, as we are all aware, we are in the midst of unusual times and some guidance from leading accounting authorities is welcomed.
Accordingly, the Association of International Certified Public Accountants, the global voice of the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA), recently made several resources available at no cost. Among these resources is the AICPA’s Center for Plain English Accounting special report titled “Consequences of COVID-19: Financial Reporting Considerations.”
The AICPA report, available for free on their website, is a leading resource on COVID-19 financial reporting questions and contains actionable guidance in a number of key financial statement areas, including subsequent events evaluation and disclosure, impairment considerations and going concern evaluation, among other topics.
More specifically, the report offers guidance in regards to:
- Evaluation of whether the consequences of the coronavirus outbreak represent subsequent events under FASB Account Standards Codification (ASC) Topic 855, Subsequent Events;
- Effects of consequences of the coronavirus on assumptions and data supporting certain accounting estimates;
- Asset impairments caused by the COVID-19 outbreak;
- Possible consideration of loss contingencies due to coronavirus effects;
- Going concern considerations in the current environment;
- Effects of modifying lease agreements on financial reporting in this environment;
- Potential effects of the coronavirus on variable consideration under FASB’s new revenue recognition standard;
- Coronavirus effects on risks and uncertainties disclosures under ASC Topic 275, Risks and Uncertainties
- Probability of a hedged forecasted transaction and the amounts involved may be affected by the outbreak;
- Appropriateness of an emphasis-of-matter paragraph in the auditor’s report.
As mentioned above, a list of other AICPA updates and resources is available on their website.
The AICPA guidance comes only a month after the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) issued a joint statement regarding certain matters, including financial reporting considerations related to COVID-19.
The statement reminded issuers of its policy to grant relief from filing deadlines in certain situations, including audit firm access to information and company personnel. They also emphasized the need for issuers to consider relevant financial statement disclosures related to the potential effects of COVID-19, including the impact of subsequent events to the organization.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional tax planner or financial planner. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.