TMT sector game changers

A biannual report on new accounting and reporting trends for technology, media and telecommunications — June 2020 edition

TMT sector game changers is a biannual report highlighting new accounting and reporting trends affecting the technology, media and telecommunications (TMT) industries, some of the most dynamic and competitive segments of the economy. Our report is  designed to help you stay informed about changes in the marketplace.

In this edition, we highlight certain COVID-19 related topics, including considerations for returning employees to the workplace, valuation and impairment reminders, collectibility of receivables (CECL, or current expected credit losses), TMT sector trends in M&A and capital markets, and SEC comment letter trends.

June 2020 Highlights

Valuation reviews and reminders on impairment considerations

In an exceptionally short period of time, COVID-19 has had a major impact on the general economy, as well as in the financial and credit markets. With so much uncertainty, companies need to begin proactively assessing what this crisis means for the value of their assets, with impairment considerations being a focal point. It will probably be an iterative process, as management works to reflect the risk and uncertainty in its cash flow forecasts, given new facts and circumstances in the wake of COVID-19. This report shines a spotlight on impairment of right-of-use assets. 

 

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SEC comment letter trends

The SEC Division of Corporate Finance’s filing review process is a key function used  by the SEC staff to monitor critical accounting and disclosure decisions applied by registrants. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus areas have changed over time, specifically for technology, media and telecommunication companies. This report looks at the top three comment letter themes: Non-GAAP financial measures, revenue recognition, and MD&A.

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Collectibility of receivables and the new credit losses standard (CECL)

Given the current market conditions and concerns about COVID-19, accounting for the new expected credit loss standard may be particularly challenging from an accounting and reporting perspective for many companies. CECL requires companies to consider current conditions and reasonable and supportable forecasts in developing an estimate of expected credit losses. This estimate requires the use of judgment, especially in times of economic uncertainty. This report highlights important factors management should consider in their models.

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Effective date of upcoming accounting standards

This report includes a summary of the FASB's accounting standard updates and effective dates for private and public companies.

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TMT deals, funding and IPO summary

The first half of 2020 saw record activity in the US bond markets, with the overall investment grade bonds markets raising more than a trillion dollars in the first 5 months of the year despite the impact of COVID-19. Overall, the TMT sector exhibited strong activity in both the high yield and investment grade bond markets as companies searched for alternatives to equity issuances to mitigate liquidity concerns and deliver shareholder value. This report digs deeper into the activity in these bond markets and discusses what it means for the sectors’ IPOs. 

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Returning to the workplace

As authorities in many states continue to ease restrictions in order to gradually restart the US economy, companies are developing their own plans for a return to the workplace. Though work may never be the same again, this report discusses what you can do now to help move your company and your employees move forward successfully, such as developing a plan to address workplace illness, determining who should return to the workplace and doubling down on automation and digital upskilling.

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Kevin Healy

US TMT Industry Assurance Leader, PwC US

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