4 A&A challenges caused by COVID-19
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4 A&A challenges caused by COVID-19

1 year ago · 2 min read · AICPA Insights Blog

For many public companies, the financial reporting challenges brought on by the COVID-19 pandemic aren’t going to disappear anytime soon. They will continue through year-end, and probably at a minimum for a few quarters after that. We’ve been hearing about the following A&A issues from those of you in the trenches — finance professionals and firm practitioners — and many of these challenges will be discussed at the AICPA Conference on Current SEC and PCAOB Developments next week. Here are some of the topics I’m expecting we’ll hear about.

  1. Impairment related to non-financial assets
    There’s no denying that the COVID-19 pandemic has caused disruptions to business operations and led to economic uncertainty. Because of this, many entities that are affected may need to continue testing their assets for impairment — goodwill, indefinite-lived intangibles and finite-lived assets, like property, plant and equipment (PP&E). Many of you have been dealing with this challenge for several quarters now and will continue to do so through year-end.

  2. Fraud
    There’s a heightened risk of fraud during recessionary environments and other uncertain times. Tomes have been written on this topic. It’s important to keep an eye out for such situations given the risk. Check out this article highlighting how CPAs can help their clients minimize fraud.

  3. Financial reporting and related auditing processes
    Management and auditors have had to adapt to new ways of working. The remote work environment has led to challenges, including those related to counting/inspecting inventory, adjusting to cloud-based systems and using videoconferencing technology. Since many entities will maintain at least some remote work operations going forward, they will need to consider how this new environment will influence how they do their periodic closing of the books, how often management will be in the office, how often auditors will be onsite to conduct audits, and how companies will maintain strong internal controls and IT security. I’d recommend looking at the AICPA COVID-19 audit and assurance and accounting and reporting resources.

  4. Fundamental accounting topics
    Accounting and auditing judgements and estimates on some big topics, such as revenue recognition and leases, are challenging enough in “normal” business times. The current environment has magnified the challenges on some of these newer accounting standards. For example, many businesses have had to change their revenue models without much notice, thereby requiring some fresh looks at the accounting under the new revenue recognition standard. Likewise, many businesses have modified their lease arrangements with lessors.

  5. Lessons learned from regulators
    Regulators have seen several quarters of reporting in the COVID-19 environment and have observations to share. Likewise, the Financial Accounting Standards Board (FASB) has its ear to the ground and has made some moves, such as delaying effective dates of standards and providing practical expedients, and is considering other changes to help industry and firm practitioners during this time.

The four challenges outlined above, lessons learned from regulators and more will be discussed at the AICPA Conference on Current SEC and PCAOB Developments Dec. 7–9, 2020.

Expect to hear:

  • Expert analyses of recent changes in standards

  • Experiences from your peers

  • Clarifications of complicated regulatory issues

  • A review of new technology affecting the profession

  • Discussions of regulatory agendas and priorities

I hope to see you at the conference!

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