United States

Financial reporting implications: CARES Act and recent SEC relief


The recently enacted Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) includes certain provisions that have significant financial reporting implications that we expect will be of interest to many entities:

  • The CARES Act includes several significant changes for corporate taxpayers that should be reflected in the provision for income taxes in the period of enactment. Companies that anticipate benefits related to prior periods or a change in deferred taxes as a result of the CARES Act should record these effects as a discrete item in the quarter of enactment. To the extent the CARES Act provisions would result in a significant change in a company’s financial statements for periods ending prior to the enactment date that have not yet been issued, the impact of the changes should be disclosed. RSM’s Tax Alert provides more information regarding the accounting for the tax provisions of the CARES Act.
  • For financial institutions, the CARES Act provides optional temporary relief from troubled debt restructuring and impairment accounting requirements for loan modifications related to the COVID-19 pandemic made during the period from March 1, 2020 to the earlier of December 31, 2020 or 60 days after the national emergency concerning COVID-19 declared by the President terminates, for a loan that was not more than 30 days past due as of December 31, 2019.
  • The CARES Act also provides optional temporary current expected credit losses (CECL) relief for insured depository institutions from Financial Accounting Standards Board Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. (Certain public business entities were required to adopt this Update on January 1, 2020.) This optional relief begins on the date the CARES Act is enacted and is of limited and uncertain benefit as it ends on the earlier of December 31, 2020 or the termination of the national emergency concerning COVID-19 that was declared by the President.

Among other stipulations, recent extended regulatory relief by the SEC provides, subject to certain conditions, publicly traded companies an additional 45 days to file certain disclosure reports, such as Exchange Act annual and quarterly reports (e.g., Forms 10-K, 10-Q, 11-K), that would have been due between March 1 and July 1, 2020. Also, the SEC recently issued guidance regarding disclosure and other securities law obligations companies should consider with respect to COVID-19 and related disruptions.

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