Chief Accountant Advises on Reporting During Covid-19By
The U.S. Securities & Exchange Commission (SEC) issued a Statement on the Continued Importance of High-Quality Financial Reporting for Investors in Light of COVID-19 in June 2020.
In it, SEC Chief Accountant Sagar Teotia said changes to the business and additional uncertainties may result in additional risks of material misstatement to the financial statements. If any change materially affects or is reasonably likely to materially affect an entity’s Internal Control over Financial Reporting (ICFR), such change must be disclosed in quarterly filings in the fiscal quarter in which it occurred.
Teotia also stressed reporting on a potential, impending bankruptcy. When conditions raise “substantial doubt” about a company’s chances of survival, management should consider whether its plans alleviate such substantial doubt and make appropriate disclosures to inform investors. “Such disclosures should include information about the principal conditions giving rise to the substantial doubt, management’s evaluation of the significance of those conditions relative to the entity’s ability to meet its obligations, and management’s plans that alleviate substantial doubt,” Teotia said.
Teotia continued that if substantial doubt about an entity’s ability to continue as a going concern isn’t alleviated after considering management’s plans, additional disclosure is required.