As the COVID-19 pandemic continues to unfold, the Securities and Exchange Commission (“SEC”) has issued updated guidance, offering a number of factors for further consideration by reporting companies as they continue to evaluate the impact of the pandemic on their business, financial condition, and results of operations. The updated guidance focuses on three particular areas of disclosure: (i) operations, liquidity, and capital resources; (ii) The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) related disclosures; and (iii) the impact of the pandemic on the company’s ability to continue as a going concern.
In particular, as it relates to disclosures around operations, liquidity, and capital resources, the SEC urges companies to reflect on the various operational adjustments undertaken in light of the pandemic, including:
- transitions to and from remote working as well as other operational adjustments to protect the health and safety of their workforce and customers;
- the impact of the pandemic on the company’s supply chain and distribution networks; and
- measures taken to shore up the company’s finances in the current economic environment, including financing activities, cost reduction efforts, as well as measures designed to improve short-term liquidity (such as renegotiating payment terms with vendors and customers).
The SEC also urges companies to continue to monitor the impact of the pandemic on their disclosure controls and procedures and their internal control over financial reporting, referring companies to their guidance from March and to review SEC Chief Accountant Sagar Teotia’s April statement on the importance of the role of high-quality financial reporting to investors in making investment decisions. The full statement is available here.
The pandemic is having unprecedented effects on all aspects of business across all industries. In the coming months, reporting companies should continually monitor and evaluate the impact of the pandemic on all aspects of their business.
If you have questions around SEC disclosure obligations in light of the COVID-19 pandemic, please reach out to a member of our Securities and Capital Markets team.
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