Yesterday, Corp Fin issued CF Disclosure Guidance: Topic 9A, relating to operations, liquidity and capital resources disclosures companies should consider with respect to business and market disruptions from COVID-19. The guidance is intended to supplement Corp Fin’s earlier guidance, CF Disclosure Guidance: Topic 9, that John blogged about in March. Acknowledging that many companies have had to make operational adjustments in response to COVID-19, including for such things as telework arrangements, supply chain and distribution changes, new or modified customer payment terms and other financing activities, the guidance reminds companies of their disclosure obligations:
It is important that companies provide robust and transparent disclosures about how they are dealing with short- and long-term liquidity and funding risks in the current economic environment, particularly to the extent efforts present new risks or uncertainties to their businesses. While we have observed companies making some of these disclosures in their earnings releases, we encourage companies to evaluate whether any of the information, in light of its potential materiality, should also be included in MD&A.
The latest guidance also discusses disclosure obligations for companies receiving federal assistance under the CARES Act and says such companies should consider the short- and long-term impact of that assistance on their financial condition, results of operations, liquidity and capital resources, as well as the related disclosures and critical accounting estimates and assumptions.
Corp Fin’s guidance also reminds companies of their disclosure obligations where there is substantial doubt about a company’s ability to continue as a “going concern” or the substantial doubt is alleviated by management’s plans. Similar to Corp Fin’s earlier guidance, the latest guidance provides a helpful list of questions that companies should ask themselves when preparing disclosure documents.
-Lynn Jokela, TheCorporateCounsel.net June 24, 2020
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