By George Wilson
Corona Conversations takes place each Friday at 1 p.m. EDT (30 to 60 minutes), where members connect and discuss new topics weekly. In these virtual meetings, members can raise questions and share insights and knowledge to help support each other as we all deal with the impact of COVID-19.
In the April 17, 2020, “Corona Conversation,” Alyson Clabaugh of Intelligize and George Wilson of SEC Institute reviewed accounting and disclosure areas affected by COVID-19, focusing on questions from members and providing example disclosures from recent filings. They will continue this review of examples in the April 24, 2020 meeting.
Here are some of the topics included in the April 17 discussions:
A disclosure in response to a question about CARES Act disclosures:
AEHR TEST SYSTEMS • 10-Q (Q3 2020) • 04/14/2020
On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company is currently analyzing the impact of these changes and therefore an estimate of the impact to income taxes is not yet available. https://apps.intelligize.com/SECFilings/View/Filings/18437872
Two examples in response to a question about the classification of lease termination costs:
FRANKLIN COVEY CO • 10-Q (Q2 2020) • 04/09/2020
SG&A Expense. Decreased Direct Office SG&A expense was primarily due to the office closure in China related to the COVID-19 outbreak, reduced travel and advertising costs, and savings in other areas of Direct Office operations. These reductions were partially offset by increased associate expenses resulting from increased commissions on higher sales and new sales and sales-related https://apps.intelligize.com/SECFilings/View/Filings/18431937
OFFICE DEPOT INC• 10-K (FY 2019) • 02/26/2020.
[Risk factor] As a consequence, trade restrictions, including new or increased tariffs, quotas, embargoes, sanctions, safeguards, customs restrictions, epidemics/pandemics, like coronavirus, and mandatory government closures could increase our cost of goods sold or reduce the supply of the products available to us. https://apps.intelligize.com/SECFilings/View/Filings/18325765
A reference to CorpFin Disclosure Guidance Topic 9 in response to a question about non-GAAP measures related to COVID-19:
See the non-GAAP guidance here: https://www.sec.gov/corpfin/coronavirus-covid-19
An example in response to a question about non-GAAP measure disclosures:
CITIZENS FINANCIAL GROUP INC/RI • 8-K (Items: 2.02, 7.01, 9.01) ● 04/17/2020 • EX-99.1.
Key performance metrics, non-GAAP financial measures and reconciliations - Underlying excluding the impact of COVID-19 on provision for credit losseshttps://apps.intelligize.com/SECFilings/View/Filings/18443473/Exhibits/12110912
An example about COVID-19 risks and uncertainties disclosures:
WOD RETAIL SOLUTIONS, INC. • 10-K (FY 2019) • 04/16/2020
Risks and Uncertainties. In December 2019, a novel strain of coronavirus surfaced in China, which has and is continuing to spread throughout the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic”. The governors of New York, California and several other...https://apps.intelligize.com/SECFilings/View/Filings/18442914
Three examples in response to a question about the impact of COVID-19 on ICFR:
INTEGRITY APPLICATIONS, INC. • 10-K (FY 2019) • 04/14/2020
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As the Company has historically had personnel both in the U.S. and Israel, there has been no change in working status due to working remotely as a result of COVID-19. https://apps.intelligize.com/SECFilings/View/Filings/18438236
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ • 10-Q (Q3 2020) • 04/10/2020
There were no changes in our internal control over financial reporting that occurred during the three months ended February 29, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Subsequent to February 29, 2020, we have not experienced any material impact to our internal controls over financial reporting given that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact to their design and operating effectiveness.https://apps.intelligize.com/SECFilings/View/Filings/18434581
INSPIRED ENTERTAINMENT, INC. • 10-K (FY 2019) • 03/30/2020
Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. Prospectively and in particular while the current remote working conditions associated with the COVID-19 outbreak remain in effect, Management intends to ensure that all reviews are fully completed prior to issuing the draft financial statements to our external auditors (or where possible make it clear this is the case) . Management will also add an additional third-party external review of the financial statements to the process prior to submission moving forward. At this time, we cannot provide assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts. In addition, we continue to evaluate and work to improve our internal control over financial reporting related to the identified deficiencies that led, in aggregate, to a material weakness, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. assurance level as of December 31, 2019.https://apps.intelligize.com/SECFilings/View/Filings/18409342
Two examples in response to questions about the impact of COVID-19 on CECL:
PNC FINANCIAL SERVICES GROUP, INC. • 8-K (Items: 2.02, 9.01) • 04/15/2020.
Provision for credit losses of $914 million, which was calculated under the Current Expected Credit Loss (CECL) accounting standard effective January 1, 2020, increased $693 million primarily due to the significant economic impact of COVID-19 and loan growth…
HOME BANCSHARES INC • 8-K (Items: 2.02, 7.01, 9.01) ● 04/16/2020 • EX-99.1
The CECL double accounting for LH-Finance was $9.3 million. The normal CECL loan provision was approximately $5.0 million and the CECL COVID-19 loan provision was approximately $71.7 million. Our CECL provisioning model is significantly tied to projected unemployment rates. As a result of COVID-19, the unemployment rate projections significantly increased from January 1 to the end of March 2020.
An example about accounting for government assistance in response to a participant question:
EY Guidance on government assistance: TTP08738-201US_CARESAct_04-03-2020.pdf
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