COVID-19 Impacts on Accounting, Disclosures and Internal Controls

Forensic & Litigation Consulting

April 3, 2020

Digital Shinning Board

The COVID-19 pandemic is, first and foremost, a public health emergency of enormous proportions. The humanitarian cost to our communities, our country and the world is vast, and at the time of this publication, still rising.

While safety and health care threats must come first, economic concerns follow shortly thereafter, as we all seek to minimize the impact on our businesses and our economy. Companies face many unknowns regarding the ability to continue critical operations, generate revenue, manage contractual obligations, obtain access to capital and credit, and available business interruption and other insurance coverage, to name a few.

Given the significant uncertainties in today’s global marketplace coupled with a direct impact to almost every geography and industry, companies need to comprehensively evaluate the impact of the crisis on their accounting, disclosures, and internal controls.

Accounting & Reporting Issues Potentially Impacted by COVID-19

Asset Impairments

Adverse events may trigger the need to prepare an impairment analysis. In these cases, many companies will need to reevaluate the inputs used in impairment models for assets, particularly with respect to expected future cash flows. Impairment issues can take many forms including:

  • Goodwill & Intangible Assets - Assessment of impairment for goodwill and indefinite-lived intangibles in accordance with ASC 350, as well as finite-lived intangibles in accordance with ASC 360.
  • Trade Receivables - Evaluation of historical loss rates to determine if and how they differ from what is currently expected over the life of current trade receivables (on the basis of current conditions and reasonable and supportable forecasts about the future).1

Footnote:

1: Alternatively, to the extent the Current Expected Credit Loss (CECL) guidance has not yet been adopted, evaluation and/or development of estimates of probable loss inherent in trade receivables with longer durations, based on historical loss rates and what is currently expected based on recent loss events.


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