June 24, 2020
Authored by: LaDawn Naegle and R. Randall Wang
On June 23, 2019, both the Division of Corporation Finance and the Office of the Chief Accountant issued additional statements to public companies and their stakeholders about the importance of “high-quality” financial reporting and the need for focused analysis and disclosures in the context of the principles-based disclosure system.
The Division of Corporation Finance issued CF Disclosure Guidance Topic No. 9A, a supplement to Topic No. 9 issued near the close of the first quarter of this year (see our prior blog post on Topic No. 9 here). The new guidance states that the Division is monitoring how companies are addressing COVID-19 related disclosures and encourages public companies to provide meaningful disclosures of the current and expected impact of COVID-19 through the eyes of management. The key topics covered by the guidance are the effects of the pandemic on a company’s operations, liquidity and capital resources; the short and long-term impact of any federal relief received under the CARES Act; and the company’s ability to continue as a going concern.
The staff acknowledges that companies are making many operational changes as a result of the pandemic – from converting to telework to modifying supply chain and customer contracts, and now converting to the return to the workplace and business reopenings. The guidance says that companies need to consider whether any or all of those changes “would be material to an investment or voting decision” and disclose accordingly. The staff takes a similar tack with respect to the