Questions to Ask When Making COVID-19 Risk Disclosures

Efforts to contain the spread of the novel coronavirus (COVID-19) have led to suspension of many economic activities, putting unprecedented strain on businesses. The Securities and Exchange Commission (SEC) recently issued guidance to help public companies provide investors and other stakeholders with useful, accurate financial statement disclosures in today’s uncertain marketplace. Nonpublic companies and non-profit organizations can utilize this guidance as well to ensure their disclosures are informative to users of financial statements.

10 questions

Here are 10 questions for companies to consider when making COVID-19-related disclosures:

1. How has COVID-19 impacted your company’s financial condition and results of operations — and how might it impact future operations?
2. How has COVID-19 impacted your company’s liquidity position and its capital and financial resources? Do you expect to incur any material COVID-19-related contingencies?
3. How will COVID-19 affect assets on your company’s balance sheet and its ability to account for those assets in a timely manner?
4. Have there been (or do you anticipate) any material impairments (for example, related to goodwill, intangible assets, long-lived assets, right of use assets and investment securities), increases in allowances for credit losses, restructuring charges, other expenses or changes in accounting judgments?
5. Have remote working arrangements and other COVID-19-related circumstances adversely affected your company’s ability to maintain operations, including financial reporting systems, internal control over financial reporting, and disclosure controls and procedures? If so, what changes in controls have occurred during the current period?
6. Have you experienced challenges or resource constraints in implementing your company’s business continuity plans, or do you foresee requiring material expenditures to do so?
7. Do you expect COVID-19 to affect demand for your company’s products or services?
8. Will COVID-19 have a material adverse impact on your company’s supply chain or the methods used to distribute products or services?
9. Will your company’s operations be materially impacted by any constraints or other impacts on its human capital resources and productivity?
10. Are travel restrictions and border closures expected to have a material impact on your company’s ability to operate and achieve its strategic goals?

This list of open-ended questions isn’t intended to be exhaustive. Each company will need to customize COVID-19-related disclosures using forward-looking information that’s based on assumptions about what may or may not happen in the future. In many situations, the impact will depend on factors beyond management’s control and knowledge.

We can help

These considerations are unprecedented for many of our clients. It may require companies to use different methods to calculate estimates than have been used in the past. Historic trends may not be as valuable as anticipated future results in determining necessary adjustments. Contact us for assistance in crafting COVID-19 disclosures or assistance in evaluating estimates in light of these unusual conditions.

View all Yeo & Yeo’s COVID-19 Resources.

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