Efforts to contain the spread of the novel coronavirus (COVID-19) have led to suspension of many economic activities, putting unprecedented strain on businesses. The Securities and Exchange Commission (SEC) recently issued guidance to help public companies provide investors and other stakeholders with useful, accurate financial statement disclosures in today’s uncertain marketplace.
New disclosure guidance
On March 25, the SEC issued interpretive guidance, Coronavirus (COVID-19), CF Disclosure Guidance: Topic No. 9. It highlights best practices in disclosing the risks and effects of the COVID-19 pandemic.
The guidance recommends using a principles-based disclosure system rooted on the concept of materiality. This means companies should disclose information that a reasonable person would find important in the total mix of information considered when making a decision to sell or buy a company’s stock.
The SEC guidance offers the following 10 questions for companies to consider when making COVID-19-related disclosures:
This list of open-ended questions isn’t intended to be exhaustive. Each company will need to customize COVID-19-related disclosures using forward-looking information that’s based on assumptions about what may or may not happen in the future. In many situations, the impact will depend on factors beyond management’s control and knowledge.
We can help
The SEC has separately provided 45-day relief for certain reports that need to be filed by public companies. This will give management extra breathing room to assess the evolving situation and estimate the probable effects of the pandemic. Contact us for assistance crafting COVID-19 disclosures in these unprecedented conditions.