Pub. 2 2020 Issue 6

29 nebraska society of cpas W W W . N E S C P A . O R G Results Realized Collaborating with Companies and CPA Firms on: − State Tax Audits − State Tax Appeals − State Tax Planning − State Tax Incentives − State Business Incentives − Site Development Incentives − Property Tax Appeals McGrath North  First National Tower, Suite 3700  1601 Dodge Street  Omaha, NE 68102 www.mcgrathnorth.com  www.nebraskastatetax.com Matt Ottemann, JD, LLM State & Local Tax & Incentives Attorney Partner, McGrath North 402-633-9571 mottemann@mcgrathnorth.com Nick Niemann, JD State & Local Tax & Incentives Attorney Partner, McGrath North 402-633-1489 nniemann@mcgrathnorth.com Subsequent Events The rate of change going on each day because of the pandemic almost guarantees subsequent events will have to be disclosed in f inancial statements. Types of subsequent events include the following: • Adjusting subsequent events where circumstances existing at the balance sheet date require financial statement adjustment • Non-adjusting subsequent events where circumstances happening after the balance sheet date are required to be explained and disclosed if amounts are material When performing an audit, CPAs should get audit evidence about what happens between the date of the financial report and the date of the audit report. When doing this, double check whether subsequent events are properly reported and disclosed in the financial statements. Government Assistance Government support in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act was made available because of COVID-19. The CARES Act includes the Payroll Protection Program (PPP) among other assistance. When accounting for government grants, remember they may not be recognized until there is reasonable assurance of compliance with the conditions of the grant. When accounting for amounts advanced to supplement employee wages, record the support as a government grant not as a reduction to payroll expense. Government grants related to income can be presented separately as a part of profit and loss or under a general account such as other income. Remember that pandemic-related payroll assistance does not account for employee fringe benefits such as bonuses, holidays, vacation days, sick days, and pension liabilities. There could be additional accruals for employees who have been furloughed and are still entitled to these benefits unless other agreements are made. Current Estimated Credit Losses (CECL) According to CECL, an entity has to estimate lifetime expected credit losses for all loans, leases, debt securities, trade receivables, and other financial assets. Losses are estimated using past events and current circumstances along with an acceptable estimate of future collections. The CARES Act has provided temporary relief for entities required to adopt CECL. Asset Impairment The pandemic has changed normal business operations. When determining impairment, carrying amounts should not be greater than recoverable amounts at the balance sheet date.When evaluating long-lived assets for impairment, it is important to measure factual evidence to figure out if problems were due to COVID-19. There is no doubt that the coronavirus pandemic is having a major impact on financial statements. The extent to which it affects financial reporting depends, as always, on the facts and circumstances. All those involved in the financial reporting process should understand the direct and indirect effects of the pandemic on the financial statements. As CPAs address the COVID-19 uncertainty, they should rely on and document professional judgement as it is important to the public now more than ever. t Susan Firriolo, CPA, CITP, CGMA, CISA, is president of Tax Correspondence Service and a leader of the Technology Work Group within the New Jersey Society of CPAs’ Accounting & Auditing Standards Interest Group. She can be reached at susan@tacs4it.com . Reprinted with permission of the New Jersey Society of CPAs.