SEC Staff Brings Down its Q1 COVID-related Reporting Guidance for Q2: Focus on Liquidity and Capital Resources, CARES Act Assistance, Ability to Continue as a Going Concern and High-Quality Financial Reporting

As June 30 rapidly approaches, public companies are busy with the quarter’s close and planning their Q2 earnings releases and quarterly reports on Form 10-Q. Even with the experience of the first quarter under their belts, management faces an ongoing challenge of determining to what extent historical results may — or may not — be predictive of future performance amidst the continuing uncertainties of the COVID-19 pandemic and related market volatility. In apparent recognition that their guidance for Q1 reporting required a bring-down for Q2, the Securities and Exchange Commission’s Division of Corporation Finance and Chief Accountant each issued public statements on June 23 that largely reaffirmed but also augmented prior guidance provided in CF Topic No. 9 and statements by SEC Chair Jay Clayton and Division of Corporation Finance Director William Hinman on April 8 and by Chief Accountant Sagar Teotia on April 3.

As the SEC announced on June 24, FASB also issued a set of FAQs dated June 22, providing useful guidance on the application of U.S. GAAP taxonomy to disclosures made in financial statement footnotes on the effects of COVID-19 and governmental relief efforts, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Topics covered in the FAQs are income taxes, payroll taxes, loans, grants of governmental relief, pensions and overall discussions of COVID-19.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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