Yesterday, the SEC issued a public statement on the effects of the coronavirus on financial reporting. In late January, John wrote about Chairman’s Clayton’s statement addressing disclosure implications from the coronavirus outbreak.
Yesterday’s statement said SEC Chairman Clayton, Corp Fin Director Hinman, SEC Chief Accountant Teotia and PCAOB Chairman Duhnke met with the leaders from the Big 4 audit firms to continue discussions around difficulties in conducting audits in China and other emerging markets. In these discussions, they also discussed the “potential exposure of companies to the effects of the coronavirus and the impact that exposure could have on financial disclosures and audit quality, including, for example, audit firm access to information and company personnel.” Here’s an excerpt from the SEC’s statement:
The coronavirus effects on any particular company may be difficult to assess or predict, because actual effects may depend on factors beyond the control and knowledge of issuers. However, how issuers plan and respond to the events as they unfold can be material to an investment decision, and we urge issuers to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.
Specifically, we emphasized: (1) the need to consider potential disclosure of subsequent events in the notes to the financial statements in accordance with guidance included in Accounting Standards Codification 855, Subsequent Events and (2) our general policy to grant appropriate relief from filing deadlines in situations where, in light of circumstances beyond the control of the issuer, filings cannot be completed on time with appropriate review and attention. In addition, if issuers have questions regarding the reporting of matters related to the potential effects of the coronavirus, including potential subsequent event disclosure, we welcome engagement on these matters.
The SEC’s statement says that companies are encouraged to contact the SEC regarding any need for relief or guidance.
-Lynn Jokela, TheCorporateCounsel.net February 20, 2020