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Accounting Considerations for Public and Private Companies Affected by Hurricane Sandy


Both public and private companies impacted by Hurricane Sandy may have filing deadline, accounting measurement and disclosure issues to take into consideration as they recover from the storm.

Suggested Action:

  • Review the SEC’s order below which provides regulatory relief through the extension of deadlines and other means to determine how it may impact your business’ filing requirements.
  • Review the other considerations related to accounting measurements and disclosures and how they may apply to your business.
  • Please contact your CohnReznick professional to determine how to address the order and the accounting measurement and disclosure issues.

SEC Assistance to Filers and Others Affected by Hurricane Sandy:

On November 14, 2012, the Securities and Exchange Commission (SEC) issued an order providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, and others affected by Hurricane Sandy.

According to the SEC, those affected by Hurricane Sandy are conditionally exempt from the federal securities laws for certain periods of time including the following:

  • Exchange Act filing requirements for the period from October 29, 2012 to November 20, 2012, provided that the filer disclose the reasons why, in good faith, it cannot file on a timely basis
  • Proxy and information statement delivery requirements for companies or others attempting to deliver materials to affected areas
  • Investment Company Act requirements for the transmittal to shareholders in affected areas of the annual and semi-annual reports of registered investment companies for the period from October 29, 2012 to November 20, 2012
  • Transfer agent compliance with Exchange Act Sections 17A and 17(f) and Exchange Act Rules 17Ad-1 through 17Ad-20, and Exchange Act Rules 17f-1 and 17f-2 for the period from Oct. 29, 2012 to Dec. 1, 2012
  • Auditor independence requirements as they relate to reconstruction of previously existing accounting records for audit clients

For additional information on the SEC’s order, visit the SEC website and the summary of the order provided in its press release at

The SEC is encouraging companies to contact its staff to discuss issues arising from specific facts and circumstances.

Accounting and Disclosure Considerations:

Companies impacted by Hurricane Sandy may face many complex financial reporting, accounting measurement, and disclosure issues. Some of the accounting measurement and disclosure issues most likely to arise and the related accounting standards that will have to be evaluated and applied are discussed below.

  • Impairments of long-lived assets with finite lives – The storm may have caused direct physical damages to property, plant, and equipment or indirect damages, such as a loss in the utility of customer lists or similar intangible assets with finite lives due to losses incurred by customers. Such events may trigger requirements to perform qualitative or quantitative tests of assets individually or in groups for impairment and recognize related losses pursuant to the Accounting Standards Codification (ASC) sections 350, Intangibles—Goodwill and Other, and 360, Property, Plant and Equipment.
  • Impairments of indefinite lived intangible assets and goodwill – Events may also trigger requirements to perform qualitative or quantitative tests of indefinite lived intangible assets other than goodwill pursuant to ASC 350 and record impairment under ASC 360 similar to the requirements for annual testing.
  • Impairments of inventories – Charges may be required under the lower of cost or market rules in accordance with ASC 330, Inventory, as a result of direct damages to inventories or indirect impairments arising from obsolescence or changes in price. If production levels are reduced by the effects of the storm, excess overhead should be recorded as an expense under ASC 330.
  • Accounts Receivable – Allowances may have to be adjusted as some customers may no longer be in a position to make payments.
  • Insurance recovery – Companies with valid insurance policies will be able to make claims for, among other things, recovery of losses from asset impairments, costs incurred to repair properties that were damaged, costs to be incurred to remediate environmental damage, and/or losses from business interruption. Significant issues may arise as to the validity of policies and the specific events that are covered which could require consultation with legal counsel. The accounting for possible and actual insurance recoveries is often complex and involves difficult evaluations of many factors, including whether the insurer has the ability to pay claims.
  • Under ASC 605, Revenue Recognition, the “exchange” of a nonmonetary asset, such as destroyed property or insurance proceeds, a monetary asset is accounted for as an involuntary conversion, with the accounting effects of the conversion recognized when the damage occurs even if the proceeds will be used to restore the asset. If the amount of the insurance proceeds cannot be determined to be probable as a result, for example, of disputes, ASC 450, Contingencies, requires the recognition of a loss for the carrying value of the damaged property in one period which may be offset in a subsequent period when recovery becomes probable. Under ASC 450, expected insurance proceeds in excess of a recorded loss represent a gain contingency that, in effect, cannot be recognized until the insurance proceeds have been received or the insurer has confirmed payment will be made. Claims for lost revenues or profits under business interruption policies are also accounted for on a gain contingency basis and, accordingly, not recognized until proceeds have been received or the insurer has confirmed payment will be made. Gains cannot be amortized over periods of expected lost revenues and operating losses cannot be anticipated. Claims for relocation and similar costs would be accounted for in the same way as property claims. Appropriate disclosures will be required for gains and losses recognized from insurance claims and uncertainties resulting in the deferral of such gains or losses.
  • Subsequent events – As a result of the extensive devastation from Hurricane Sandy, it may take time to obtain and evaluate the information needed to estimate and finalize the amounts to be recorded as gains or losses from asset impairments, insurance recoveries, and other matters. Evaluations of additional information will be required at each balance sheet date prior to the final determination of any actual gains or losses in accordance with ASC 855, Subsequent Events. The effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet are to be recognized unless that would result in recording a gain contingency. Judgments as to which subsequent events must be recognized may be difficult, and appropriate disclosures about recognized and unrecognized subsequent events will be required.
  • Income statement presentation – Although a company’s losses from asset impairments, business interruptions and other events attributable to Hurricane Sandy could be extensive, the losses must be both unusual in nature and nonrecurring to qualify for classification as an extraordinary item in the income statement under ASC 225-20, Income Statement – Extraordinary and Unusual Items. We believe that hurricanes in the areas struck by Hurricane Sandy are recurring events and, accordingly, it is highly unlikely that it will be possible to present any resulting losses as extraordinary. Instead, if significant, they should be presented as a separate component of income from continuing operations either on the face of the income statement or in the notes to the financial statements.


For more information, please visit our webpage and contact Kenneth Nielsen Goldmann, Partner, or your CohnReznick client service professional for additional guidance.

To ensure compliance with the requirements imposed by the IRS, please be informed that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.


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