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Financial Reporting and Regulatory Update

First Quarter 2020

From the AICPA

Resource site for addressing coronavirus matters

The AICPA has created a coronavirus resource center webpage presenting resources that the AICPA has developed and gathered to help the accounting profession stay up to date on matters affected by coronavirus. The site offers information on:

  • CARES Act news and resources
  • COVID-19 resources addressing audit and assurance, accounting and reporting, technology, and tax, among other topics
  • Advocacy and tax relief matters
  • Virtual and other learning opportunities
  • News and other resources

FAQ document on COVID-19 auditing and financial reporting issues

On April 3, 2020, the AICPA released “FAQs – Audit Matters and Auditor Reporting Issues Related to COVID-19,” which is intended to help both auditors of financial statements and preparers by providing answers to frequently asked questions and guidance on several financial reporting topics. The report answers questions on various auditing areas and provides information addressing the financial reporting considerations for risks and uncertainties, subsequent events and going concern, fair value measurements, asset impairments, unusual or frequent events, and deferred tax assets.

COVID-19 financial reporting considerations

On March 18, 2020, the AICPA issued a special report addressing the financial reporting implications and challenges created by the coronavirus. The report provides, among other topics, reminders of areas to consider including subsequent events, accounting estimates, asset impairment, loss contingencies, the ability to continue as a going concern, leases, variable consideration, risks and uncertainties disclosures, and hedging relationships. It also provides examples of disclosures from 10-K forms.

New TQAs on deferred taxes

In December 2019, the AICPA issued Technical Questions and Answers (TQAs) under Section 3300, “Deferred Taxes.” The new TQA section provides guidance relating to the limitation on interest deductibility for certain companies adopted under Section 163(j) of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, which in general limits deductions of net interest expense to 30% of adjusted taxable income. Section 163(j) was effective for tax years beginning after 2017. The TQAs also describe how an entity should assess realizability of its existing deferred tax assets related to disallowed interest deductions when there are 1) reversing deferred tax liabilities, and 2) an expectation of future interest expense that also will be limited under Section 163(j).