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The coronavirus (COVID-19) outbreak \u2014 officially a pandemic as of March\u00a011 \u2014 has prompted global health concerns. But you also may be worried about how it will affect your\u00a0business and its financial statements for 2019 and beyond.<\/p>\n
Close up on financial reporting<\/strong><\/p>\n The duration and full effects of the COVID-19 outbreak are yet unknown, but the financial impacts are already widespread. When preparing financial statements, consider whether this outbreak will have a material effect on your company\u2019s:<\/p>\n Also monitor your customers\u2019 credit standing. A decline may affect a customer\u2019s ability to pay its outstanding balance, and, in turn, require you to reevaluate the adequacy of your allowance for bad debts.<\/p>\n Additionally, risks related to the COVID-19 may be reported as critical audit matters (CAMs) in the auditor\u2019s report. If your company has an audit committee, this is an excellent time to engage in a dialog with them.<\/p>\n Disclosure requirements and best practices<\/strong><\/p>\n How should your company report the effects of the COVID-19 outbreak on its financial statements? Under U.S. Generally Accepted Accounting Principles (GAAP), companies must differentiate between two types of subsequent events:<\/p>\n 1. Recognized subsequent events.<\/strong> These events provide additional evidence about conditions, such as bankruptcy or pending litigation, that existed at the balance sheet date. The effects of these events generally need to be recorded directly in the financial statements.<\/p>\n 2. Nonrecognized subsequent events.<\/strong> These provide evidence about conditions, such as a natural disaster, that didn\u2019t exist at the balance sheet. Rather, they arose after that date but before the financial statements are issued (or available to be issued). Such events should be disclosed<\/em> in the footnotes to prevent the financial statements from being misleading. Disclosures should include the nature of the event and an estimate of its financial effect (or disclosure that such an estimate can\u2019t be made).<\/p>\n The World Health Organization didn\u2019t declare the COVID-19 outbreak a public health emergency until January\u00a030, 2020. However, events that caused the outbreak had occurred before the end of 2019. So, the COVID-19 risk was present in China on December\u00a031, 2019. Accordingly, calendar-year entities may need to recognize the effects in their financial statements for 2019 and, if applicable, the first quarter of 2020.<\/p>\n Need help?<\/strong><\/p>\n There are many unknowns about the spread and severity of the COVID-19 outbreak. We can help navigate this potential crisis\u00a0and evaluate its effects on your financial statements. Contact us for the latest developments.<\/p>\n \u00a9 2020<\/em><\/p>\n <\/body> The coronavirus (COVID-19) outbreak \u2014 officially a pandemic as of March\u00a011 \u2014 has prompted global health concerns. But you also may be worried about how it will affect your\u00a0business and its financial statements for 2019 and beyond. Close up on financial reporting The duration and full effects of the COVID-19 outbreak are yet unknown, but […]<\/p>\n","protected":false},"author":3,"featured_media":14448,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-14449","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-aa"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14449","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=14449"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14449\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=14449"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=14449"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=14449"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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