The coronavirus may impact a company’s operations, and consequently, the nature and amounts and disclosures in the financial statements and more broadly.
Companies may need to adjust revenue recognition for changes in estimates of amounts customer will pay. Collectibility of receivables will also need to be assessed and revenue recognition may be impacted if payment is not probable.
When disruption to the supply chain and reduced demand affect financial projections, there’s the possibility of impairments. Also, decreases in production can also require manufacturing overhead to be expensed.
There may be impacts in other areas, like hedge accounting, stock compensation, and more.
Process changes from the above items can impact internal controls
Stakeholders, including regulators, are focused on the transparency of disclosure of the actual as well as anticipated impacts. The impacts may be direct or indirect and could include effects on supply chains, service providers, business partners, capital providers, and business practices.
Evaluate the breadth of impact considering both direct and indirect effects. Each element of financial reporting impacted by the outbreak may have specific disclosure requirements or may otherwise require disclosure.
Consider the need to discuss the impact of the coronavirus outside the financial statements, such as in the description of the business; risk factors; and management's discussion and analysis of results, liquidity, and capital resources (including consideration of trends and uncertainties).
Review coverage and limits of any business interruption insurance. Determine how to substantiate lost revenue or income and over what period of time.
PwC provides trusted advisors for accounting, financial reporting and valuation support. We are well-versed and experienced in regulatory and reporting requirements.
We are helping clients assess subsequent events disclosures as well as the accounting for business interruption, supply chain disruption, and other impacts of the virus.
Specialists serve as a resource for navigating complex accounting issues and disclosure requirements and keep companies informed of key developments and considerations.
Evaluation of financial processes and controls
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