FINANCIAL REPORTING: Coronavirus May Cause Complications for Some Entities

    coronavirus corona virus

    The rapid spread of the new coronavirus around the world is having repercussions on global trade and business operations of various entities, some directly and some indirectly. This may raise financial reporting considerations for some U.S. entities.

    It is important to note that a business may be completely U.S.-based yet still have financial reporting considerations related to the coronavirus, such as:

    - being dependent on a timely flow of inventory or materials from entities in a coronavirus-affected area;

    - potentially having to cancel major conferences, whether or not they are in a coronavirus-affected area; or

    - other disruptions to operations caused by travel restrictions and precautionary measures.

    The considerations below are intended to be “food for thought” and are not meant to cover every possible circumstance. The coronavirus outbreak is a rapidly developing situation, and its effect, if any, on each industry and individual entity is facts- and circumstances-based. 

    Potential impacts of the coronavirus on financial statements




    For entities with operations in heavily affected areas, any restrictions on financial transfers that arise may make it appropriate to consider cash as “restricted cash” for financial reporting purposes, along with further disclosures relative to the reporting entity’s potential lack of access to the restricted cash.


    Customers in coronavirus-affected areas may be slower or less likely to pay, invalidating previous assumptions about a company’s ability to collect (such as aging strata, payment history, etc.).


    Due to potential disruptions to manufacturing and transportation into and out of coronavirus-affected areas, the net realizable value of inventory may become lower than cost because of issues such as quarantine, spoilage, or civil unrest.


    If inventory were to be quarantined or inaccessible to a reporting entity, it may be appropriate to classify as a long-term asset on the balance sheet the portion of the inventory not reasonably expected to be realized in cash during a “normal operating cycle.”

    Property and equipment

    A quarantine or other coronavirus-related triggering event may necessitate testing for the recoverability and impairment of property, plant, and equipment (PPE). Appropriate disclosure may also be required.


    Events in coronavirus-affected areas may cause intangibles to be impaired.


    New costs or obligations incurred due to the coronavirus may lead to additional accruals or changes in existing accruals. For example, there could be incremental costs incurred to re-position and re-deploy equipment from coronavirus-affected areas.

    In addition to disclosure related to coronavirus-related accruals, consider contingency/uncertainty disclosure in the notes section of financial disclosures.

    Revenue recognition

    Events in coronavirus-affected areas, such as quarantines and the shutdown of transportation networks, could adversely affect the way that revenue is recognized. This may impact revenue that is generated in coronavirus-affected areas. Further, disruptions in the supply chain could impact inventory volume and therefore the ability to generate sales at levels previously achieved outside of the coronavirus-affected areas.

    Subsequent events

    Consider including any disclosures of subsequent events in the notes to the financial statements (in accordance with guidance included in Accounting Standards Codification 855, “Subsequent Events”).


    Reporting entities should consider whether events in coronavirus-affected areas prompt additional risk disclosures.


    Those with exposure to the coronavirus-affected areas are encouraged to consider including contingency/uncertainty disclosures in the financial statements regarding issues such as potential losses or impairments, supply chain disruption, or revenue declines.

    Going concern

    A reporting entity’s exposure to coronavirus-affected areas may raise or contribute to other existing facts and circumstances that collectively raise substantial doubt about the entity’s ability to continue as a going concern. The various factors in U.S. GAAP (ASC 205-40) and U.S. GAAS (AU-C 570) or PCAOB (AS 2415) may be considered.

    Understanding how to prepare for and recover from natural disasters or outbreaks like the coronavirus can be complex. To learn more about our expertise in this area, or for additional information on potential financial reporting issues relating to the coronavirus situation, please contact us.


    Steven Morrison, CPA, Partner, National Assurance


    Subject matter expertise

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      Steven Morrison

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    This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.