First Quarter — 2020

by Magnus Orrell and Joseph Renouf, Deloitte & Touche LLP

Welcome to Quarterly Accounting Roundup: First Quarter — 2020. The headlines for the first quarter of 2020 have been dominated by the emergence of the novel coronavirus disease 2019 (COVID-19) pandemic. The pandemic is affecting major economic and financial markets, and virtually all industries are facing challenges associated with the economic conditions resulting from efforts to address it. For example, many entities in the travel, hospitality, leisure, and retail industries have seen sharp declines in revenues due to regulatory and organizational mandates (e.g., “shelter in place” mandates, school closures) and voluntary changes in consumer behavior (e.g., “social distancing”). Entities must carefully consider their unique circumstances and risk exposures when analyzing how recent events may affect their financial reporting.

The SEC and PCAOB have also been quick to respond to the COVID-19 crisis, jointly releasing a statement on how audit quality can be affected by COVID-19. In addition, the SEC issued an order that grants certain companies “a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020.” The staff of the SEC’s Division of Corporation Finance (the “Division”) has also issued guidance reflecting its views on disclosure considerations for companies that have been affected by COVID-19. Further, the Commission has released guidance related to annual meetings, proxy materials, and other matters to help issuers, shareholders, and other market participants affected by COVID-19 meet their obligations under the federal securities laws.

Other recent highlights include the following:

The FASB’s issuance of Accounting Standards Updates (ASUs) that (1) improve the guidance for financial instruments; (2) clarify the interaction between the accounting requirements for investments in equity securities and those for equity method investments and certain derivative instruments; (3) simplify income tax accounting; and (4) provide optional expedients and exceptions to certain accounting requirements to facilitate the transition away from interbank offered rates.
The SEC’s release of (1) final rules that expand the qualifications for nonaccelerated filer status and simplify the disclosure requirements related to guarantors and collateralizations of securities and (2) a proposed rule that would modernize MD&A and related disclosure requirements.
The International Accounting Standards Board’s (IASB®) publication of amendments to IAS 1 that clarify the classification of liabilities.

Conclusions of the FASB, GASB, IASB, and IFRS Interpretations Committee are subject to change at future meetings and generally do not affect current accounting requirements until an official position (e.g., Accounting Standards Update or IFRS Accounting Standards) is issued. Official positions are determined only after extensive deliberation and due process, including a formal vote.

Further information about the standard setters can be found on their respective Web sites as follows: www.fasb.org (FASB); https://www.fasb.org/page/PageContent?pageId=/about-us/advisory-groups/eitf/openissuesandproposedagenda.html (EITF); https://www.aicpa-cima.com/home (AICPA & CIMA); www.sec.gov (SEC); https://pcaobus.org (PCAOB); https://fasab.gov (FASAB); www.gasb.org (GASB); and www.ifrs.org (IASB and ISSB).

Quarterly Accounting Roundup is prepared by members of Deloitte’s National Office. The purpose of this publication is to briefly describe key regulatory and professional developments that have recently occurred in the field of accounting and to provide links to locations where additional information can be found on each topic. Readers seeking additional information about a topic should review the information referred to in the hyperlinks and not rely solely on the descriptions included in this communication.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

As used in this document, “Deloitte“ means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.