Audit Analytics has just released a deep dive into the impact of COVID-19 on financial reporting and financial wellbeing. To assess the effect of the pandemic, the report looked at going-concern audit opinions, impairment charges, late filings and changes in the control environment, as well as restatements. Some of the results might be surprising. For example, the pandemic had a significant impact on impairment charges, but the number of going-concern qualifications in audit opinions? Not so much.
A Christmas gift from the SEC staff: guidance on disclosure of the accounting effect of the Tax Cuts and Jobs Act
Yesterday, the staffs of the Office of Chief Accountant and Corp Fin issued guidance regarding disclosure of the accounting impact of the Tax Cuts and Jobs Act, just signed into law on December 22. As discussed in this PubCo post, companies have been fretting about the timing of the new Act and whether they will be able to accurately determine the impact of the tax changes on their financial statements in time to file their annual and quarterly reports with the SEC. That is largely because, under U.S. accounting rules, companies must generally reflect the impact of these tax changes in the quarter they are signed into law, even if they go into effect at a future date. The staff has been talking with companies about their concerns and has responded with this guidance, which, Corp Fin Director Bill Hinman observes, “recognizes that investors demand and deserve high-quality information, while also recognizing that entities may face challenges in accounting for one of the most comprehensive changes to the U.S. federal tax code since 1986.” According to the related SEC Statement, the “staff guidance, which reflects the approach taken in prior situations where legislative changes could significantly affect financial reporting, provides a ‘measurement period’ for issuers to evaluate the impacts of the [Act] on the their financial statements. Importantly, the guidance also sets forth staff expectations for disclosure to investors during the measurement period.” Merry Christmas finance departments and auditors!