Alan Stein, Director of Audit and Accounting Services at Gorfine, Schiller & Gardyn (GSG), discusses how companies can best manage business disruption in today's uncertain climate.

Q: How are companies currently managing business disruption from an audit and accounting perspective?

A: Companies are making it a priority to ensure their employees are safe. This includes figuring out remote access for employees to work from home. Businesses are also deciding whether to keep their doors open or not, which is a day-to-day decision at this point in time, depending on state laws.

From an audit and accounting perspective, businesses will face a significant disruption from this virus. Unfortunately, it's still early in the process, and the scope of the impact on the United States is very much unknown.

In the meantime,it’s important for businesses to disclose to the users of financial statements what's generally going on in the form of a subsequent event disclosure, how their business has been impacted, and what they're doing to continue moving matters forward.

Q: What should companies know or consider when it comes to financial statements, going concern, and being more prepared?

A: Most companies are working on different stages with their December 31^st, 2019 financial statement. In that context, no adjustments need to be made to the financial statement since the virus was not present at the date of the financial statement. However, it’s important to disclose the impact to the financial statement users when something is going on, subsequent to the company’send, which has a significant effect on a business. For many companies, this guidance has the potential to be significant.

While adjustments don't need to be made for December 31^st financial statements, one consideration to keep in mind is going concern. Going concern is especially significant if the company is not in a particularly good place to begin with, which needs to be addressed. For instance, is the company confident that they're going to be around twelve months from the financial statement position date? Even if they’re confident, do they feel as if they could directly address that in their financial statement disclosures (what their plans are and why they're confident)? If not, then it's a good idea to disclose that information in order to do their best to alleviate the financial statement users’ concerns.

March 31^st financial statements are going to be a lot more involved, as a result of the impact of the virus, because businesses are going to have to look at the actual accounting impact of entries. For instance, if a company has a piece of equipment that loses its full value because a business shut down,that company will need to adjust the value impairment of the piece of equipment. They’ll also have to look at their receivables and see whether they have customers that have business issues. March 31^st financial statements are going to become more complex and involve a lot of estimates.

Q: Why is it important to have accountants involved in any strategic discussions when it comes to developing business disruption plans?

A: In general, when it comes to a company’s business plan, it's beneficial to involve accountants and other strategic advisors. These are the people that have been involved in the business when something is changing, such as growth and/or new product discussions. These are also the people involved in the negative discussions, when things aren't going so well, to talkover next steps and how to implement damage control. This group of people is not only important because they know about the business, but they also care about the business, providing a different, helpful perspective.

Including an accountant in strategic decisions is beneficial because in the case of disruption, an accountant can be a useful source to provide reminders of deadlines and updates, especially as guidelines are changing, whether it be from an Accounting Standard, the IRS, or local states. Regarding financial statements, involving an accountant helps in the process because they have more than likely helped, contributed, or at the very least, listened to the company’s plans to ensure processes run smoothly rather than creating additional strain on a company.

Managing business disruption in today's uncertain climateis an ongoing challenge. For additional audit and accounting information and guidance during the coronavirus outbreak, contact GSG.

Alan Stein is a Director, Audit and Accounting Services, at GSG with over 10 years of public accounting experience. He manages audit, review, and agreed upon procedures engagements for clients in a wide variety of industries, including not-for-profit, real estate, healthcare, and manufacturing.

About Gorfine, Schiller & Gardyn, P.A.

Gorfine, Schiller & Gardyn, P.A. (GSG) is a Maryland-based full-service certified public accounting firm offering a wide range of accounting and consulting services to clients of all sizes. GSG employs the traditional business practices of a small company, delivering solid advice and solutions, and providing unparalleled client service. One of the greatest assets GSG brings to its clients is a team of experts trained to the highest industry standards. As problem solvers with an entrepreneurial drive, GSG associates are committed to the success of their clients’ businesses. For more information, click here.