On June 23, 2020, the Securities and Exchange Commission (“SEC”) issued additional guidance on disclosures that companies should consider with respect to the impact of COVID-19. As companies are making changes in response to business disruptions and economic downturn caused by COVID-19, SEC suggests considering additional disclosures in companies’ financial statements to ensure transparency with investors.
SEC suggests analyzing the following for disclosure in MD&A with respect to operations and liquidity:
- Operational challenges and how they are being addressed by the Board of Directors (such as safety policies and challenges related to employees returning to work)
- The company’s overall liquidity position and outlook
- Additional financing obtained to address liquidity needs and the impact of COVID-19 on ability to obtain financing
- Ability to meet financial covenants and comply with the terms of existing financing arrangements
- Cost cutting measures
- Metrics used to monitor liquidity
- Adjustments to the terms with the customers and suppliers, and impact of such adjustments on financial position of the company
SEC suggests considering the following for disclosure of federal assistance received through the CARES act:
- Material conditions of the loans received and the impact on the financial condition
- Impact of any tax relief on short-term and long-term liquidity
- Any new accounting estimates or judgements (such as probability of loan forgiveness)
Lastly, the companies should consider providing disclosures related to the company’s ability to continue as a going concern, and the company’s plans to overcome the challenges caused by COVID-19.
See the link below for more detailed information: