News Articles

The coronavirus outbreak that originated in Wuhan, China has spread to at least 65 countries and has sickened more than 89,000 people, with more than 3,000 deaths. Governments have shut borders and imposed quarantines, and companies have imposed travel bans. The human and economic impacts on businesses have been stark. 

This epidemic is a wake-up call for companies to carefully review the strategies, policies, and procedures they have in place to protect employees, customers, and operations in this and future epidemics. Here are eight questions that companies should ask as they prepare for — and respond to — the spread of the virus. 

While it's not yet clear the extent to which COVID-19 will take its toll on our collective epidemiological, social, and economic health, it’s becoming very clear that people are frightened and businesses are preparing for down-side scenarios. If you are a business leader asking the tough questions about how resilient your business is, I suggest we start with a more foundationally important question: How resilient are your people?  

For anyone managing people, this new business climate entails navigating much more than the actual impacts on the workforce, supply chain, and customer experience—it means keeping people focused, agile, and able to manage through fast-changing and adverse situations. Clearly, keeping your workforce resilient in this climate is going to be a challenge, but also an opportunity.  

It’s reasonable to be concerned about the spread of the coronavirus worldwide. But it’s not the time to panic, especially for organizations, said Jennifer Elder, CPA/CFF, CGMA, a consultant and author. Business leaders should be proactive in putting emergency plans in place: for employee well-being, business continuity, remote working, and other areas. 

“It’s not just about you and your business,” Elder, the owner and president of The Sustainable CFO consulting firm, said in a podcast about disaster planning. “You really have to be mindful of what’s happening with your employees, your customers, and your vendors. You start to realize that your company has an ecosystem, and if one part is not healthy, it affects everything else.”

The IRS officially announced that, because of the ongoing coronavirus pandemic, tax returns due April 15 will not have to be filed until July 15 this year. Notice 2020-18 was released hours after Treasury Secretary Steven Mnuchin had broken the news in a tweet.

The AICPA expressed its thanks to Treasury and the IRS for the filing extension and to its members and the state CPA societies for their outreach to federal legislators and administrators on the issue. 

The postponement applies to any “individual, a trust, estate, partnership, association, company or corporation” with a federal income tax return or income tax payment due on April 15 (affected taxpayer). Any affected taxpayer receives an automatic postponement of that deadline until July 15. They do not have to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, or Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. 

The state of the capital markets, and ultimately, corporate reporting, impacts every person in unique and significant ways — as consumers and investors. And no one cares more about the integrity and quality of corporate reporting more than the public company auditing profession, recognizing that financial revisions and restatements are indicators of audit quality. For nearly two decades, the story told by those indicators has been positive. Audit Analytics recently reported that "total restatements dropped for four consecutive years to an 18-year low." 

The new lease accounting standard caused lease liabilities for the average company to increase a whopping 1,475 percent, skyrocketing from $4.4 million before the transition to $68.9 million post transition, as operating leases were recorded on the balance sheet for the first time, according to a new study. 

The study, from the lease accounting software provider LeaseQuery, analyzed more than 400 companies in its customer base and found that the increase was particularly striking in certain industries, such as financial services, where the amount of the average lease liability increased 6,070 percent. Similarly, in the health care industry, average lease liability liabilities went up 1,817 percent, in the restaurant industry 1,743 percent, in the energy industry 1,542 percent, in retail 1,012 percent, and in manufacturing 495 percent. 

The Internal Revenue Service has released a set of proposed regulations for businesses to follow when deducting meals and entertainment, in response to the 2017 tax overhaul.

The Tax Cuts and Jobs Act got rid of the deduction for any expenses related to activities typically considered to be for entertainment, amusement or recreation. It also restricted the deduction for expenses related to food and beverages offered by employers to workers.

The regulations proposed by the IRS aim to address the elimination of the deduction for expenditures related to entertainment, amusement or recreation activities and give guidance to figure out whether an activity is considered to be entertainment. The proposed rules also deal with the limitation on the deduction of food and beverage expenses. 

Early adopters of the new hedge accounting standard that took effect for public companies’ 2019 fiscal years drove an uptick in the use of hedge accounting in 2018, new research shows. 

Chatham Financial’s analysis of corporate hedging in 2018, the latest year for which hedging data can be compiled, indicates that 53% of U.S. public companies with commodities hedging programs applied hedge accounting to them. 

That was up from 45% in 2015, when Chatham last performed the research. 

The new lease accounting standard caused lease liabilities for the average company to increase a whopping 1,475 percent, skyrocketing from $4.4 million before the transition to $68.9 million post transition, as operating leases were recorded on the balance sheet for the first time, according to a new study. 

The study, from the lease accounting software provider LeaseQuery, analyzed more than 400 companies in its customer base and found that the increase was particularly striking in certain industries, such as financial services, where the amount of the average lease liability increased 6,070 percent. Similarly, in the health care industry, average lease liability liabilities went up 1,817 percent, in the restaurant industry 1,743 percent, in the energy industry 1,542 percent, in retail 1,012 percent, and in manufacturing 495 percent. 

While some organizations have transitioned smoothly, others are still struggling to make the necessary business process and control changes.

To comply with the new lease accounting standards, organizations have had to implement new business processes, new organizational structures, and new information systems. Most organizations have muscled through the first year of adoption using a combination of brute force and high-priced consultants. However, those approaches will not scale over the long term.

The technical accounting changes promulgated under the new standards are just one aspect. Accountants will have to make significant judgments to conform with the new lease accounting rules. Those judgments must be regularly re-evaluated and updated as facts and circumstances become known, and contingencies resolved.