April 2020 Article Archives

Moving to remote work in a crisis mode oftentimes is a quick Band-Aid or bootstrap — but these basics will most likely serve as a solid foundation for the long-term evolution for firms to incorporate more of a remote-workforce business model. We’ve all just gotten a very big nudge to do it sooner. 

It may not feel like it now, but your future firm will reap the benefits of allowing more flexibility to staff — newer hires in a tight talent market demand flexibility. You’ll also lay the groundwork to augment your staff either with off-premise permanent hires or even short-term gig players during busy season or to add a task-specific set of skills. 

In addition to causing enormous disruption to health, safety, and the economy across the globe, the coronavirus pandemic has significantly altered the landscape for CPAs related to the lease accounting standard. 

The changes include a potential effective date delay of FASB’s new lease accounting standard for certain entities, including private companies; a monumental increase in the number of lease modifications requested by lessees and granted by lessors; and the need for disclosures related to a company’s lease accounting decisions in the new environment. 

The coronavirus pandemic is upending the ability to collect and pay rents or other lease obligations, as well as hampering lease accounting and compliance with ASC 842. Without the right accounting tools to handle the various changes, companies may spend hours or days creating tedious workarounds to make adjustments for compliance requirements. Here are the significant areas of lease accounting that will be affected by Coronavirus or COVID-19. 

Rent Concessions

Many lessees, besieged by the economic impact of COVID-19, have requested rent concessions. Some lease contracts contain clauses regarding unforeseeable circumstances like pandemics, but many don’t. If a contractual or regulatory requirement – such as a force majeure clause – provides an enforceable right to rent relief, the lessee may record the favorable impact as a variable lease payment. If no such enforceable right exists, a rent concession may need to be accounted for as a lease modification. A lease modification will result in the re-measurement of lease accounting calculations. However, a variable impact will not require re-measurement of the ROU asset and lease liability. Lease accounting software should provide different tracks to record variable lease payments vs. lease payments associated with a modification, and provide automatic re-measurement. 

A package of coronavirus relief legislation that was signed into law Wednesday includes provisions for paid sick leave, family leave and medical leave, along with tax credits to help employers and the self-employed pay for them. 

The Families First Coronavirus Response Act also includes provisions for free coronavirus testing, enhanced unemployment insurance, expanded food security initiatives and increased Medicaid funding from the federal government. 

The law requires employers with under 500 employees to give paid sick leave and paid family and medical leave to eligible employees who have worked at least 30 days before the impact of novel coronavirus. Businesses need to provide up to 10 business days (or two weeks) of paid sick leave and as many as 10 weeks of protected paid family and medical leave for eligible employees impacted by the disease. 

The Internal Revenue Service has stopped processing paper tax returns, with much of its staff now working remotely because of the novel coronavirus pandemic, and is encouraging taxpayers to file their taxes electronically during the three-month extension period for this year’s tax season. 

The IRS said that to protect the public and its own employees, and in compliance with orders of local health authorities across the U.S., some IRS services such as live assistance on telephones, processing paper tax returns and responding to correspondence are extremely limited or suspended until further notice. All of the IRS’s in-person Taxpayer Assistance Centers are temporarily closed along with many volunteer tax preparation sites until further notice. However, that won’t affect the IRS's ability to deliver “economic impact payments,” the stimulus payments of at least $1,2000 that it began directly depositing Saturday in some taxpayers’ bank accounts. 

The Internal Revenue Service is now accepting email and digital signatures on tax documents to make it easier for tax professionals and taxpayers to communicate with the agency during the novel coronavirus pandemic. 

The IRS said Monday that, effective immediately, it would “begin temporarily accepting images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of tax liability.” 

In addition, the IRS is letting its employees accept documents through email, transmitting documents to taxpayers using SecureZip or other “established secure messaging systems.” 

The House passed a massive $2.2 trillion stimulus bill containing tax relief for both businesses and individuals and other stimulus measures in response to the coronavirus pandemic, and President Trump quickly signed it into law. 

According to the Washington National Tax Office of Top Six firm Grant Thornton, the business provisions of the act include:

In addition to income-related rebate checks of $1,200 per filing adult and $500 per qualifying child, the individual provisions include:

Other tax experts focused on some of the other provisions of the far-reaching legislation, such as net operating losses. 

The Financial Accounting Standards Board plans to propose that private companies and not-for-profit organizations get an extra year to implement the lease accounting standard while they deal with the coronavirus crisis, while also giving private franchisor companies an extra year to get ready for the revenue recognition standard. 

FASB held a meeting Wednesday with its members and staff attending remotely to discuss the impact of the coronavirus crisis on some of the upcoming accounting standards.Some franchise businesses have been asking for relief from the revenue recognition standard. BrightStar Care CEO Shelly Sun, a CPA and home health care franchisor with over 300 locations, and a former chair of the International Franchise Association, visited Capitol Hill in February to lobby for changes in the standard, saying it would harm over 100,000 franchise businesses around the country.