Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Archive for the ‘Accounting’ Category

Economic destruction from lockdown continues to expand.

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There is severe danger that a growing number of businesses are going to look like this over the next few months. Abandoned Safeway store [01] by Ben Schumin is licensed under CC BY-SA 2.0

Going concern thoughts for accountants:  I have stopped cross posting all my comments on the pandemic to this blog. The focus here is accounting and attestation issues.

The following conversation is worth listing here, so you can bring into consideration what is going on in the broader economy as you ponder your client’s going concern assessments. The economic damage from the shutdown is an issue for audits, reviews, and comps.

You might pay particular attention to comments by  the Atlanta Fed on near-term GDP forecasts.

 

The damage from the lockdown is spreading. More news is emerging about the devastation that took place in just the first full month of the closure.

The damage will continue to grow the longer the shutdown continues. At some point it will start compounding, growing at a faster rate out of proportion to the time that is passing. Keeping the economy closed now is unnecessarily so the compounding damage is a choice.

Merely a few of the articles in recent days:

  • Guess on GDP shrinkage in next quarter
  • Disproportionate number of poorer households hit by job losses
  • Collapse of tax revenue in New York state
  • Collapse of home sales in Southern California
  • Another retail chain announce store closures and another announces liquidation

It is imperative to reopen the economy in full, not just for ‘curb-side delivery.’ If we don’t open soon, I fear the following articles will be mild in comparison to what we will see in the future.

This discussion will be posted on several of my blogs.

5/16/20 – Fox Business – US GDP could sink over 40%: Atlanta Fed – Federal Reserve Bank of Atlanta is forecasting a 42.8% drop in GDP for the second quarter of  2020.

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Written by Jim Ulvog

May 22, 2020, 9:24 am at 9:24 am

A few highlights from CalCPA’s Not-for-profit Conference.

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Listened to CalCPA’s virtual Not-for-profit conference today.

Lots of great stuff during the sessions. Three items were worth sharing on Twitter during the day. Thought I’d share them here as well:

How to account for PPP forgiveness.

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Written by Jim Ulvog

May 20, 2020, 17:23 pm at 5:23 pm

Posted in Accounting, Other stuff

Forgiveness of PPP loans.

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There are lots of details and nuances to the federal Paycheck Protection Program. I’m not up to speed on PPP so I won’t be commenting on the program, especially the forgiveness rules.

There is a growing volume of information on the ‘net describing the program. Here are some resources you can check out to learn more.

SBA forgiveness application

5/15/20 – Small Business Administration – Paycheck Protection Program Loan Forgiveness Application,” Small Business Administration, – The SBA published the text of the forgiveness application.

Commentary on forgiveness application

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Written by Jim Ulvog

May 19, 2020, 8:03 am at 8:03 am

Posted in Accounting, Other stuff

Issues for auditors to consider as result of pandemic.

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This economic catastrophe is giving auditors lots to think about during audits. Reviews and comps are also affected.

Going concern will be a major issue on all engagements for a long time to come.

Goodwill impairment will be more important and more difficult.

Finally, consider that the rules for PPP eligibility are being rewritten after the first round of loans have already been approved by SBA and funded.

Going concern

4/23/20 – Bloomberg tax – Dave & Buster’s “Going Concern” Warning Signals Wave to Come – Management issued a going concern warning. For nonaccountants this means the company concluded “there was a substantial risk that the entertainment company would not survive the next 12 months.”

Article reports many companies are doing a much more in-depth analysis of the going concern assessment.

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Written by Jim Ulvog

April 28, 2020, 8:50 am at 8:50 am

Economic damage from shutdown – 4/15.

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A few more articles on damage we are seeing from the economic shutdown.

Guess on California unemployment rate

April 2020 – Eberhardt School of Business, University of Pacific – Initial Estimates of Employment Impacts of Covid-19 Pandemic – The school of business estimates an unemployment rate of 18.8% in California for the month of May 2020.

This is in contrast to 2010 rate of 12.2% and 2019 rate of 4.0%.

Likely increase in bankruptcies

4/13/20 – Washington Examiner – Pandemic likely to exceed Great Recession in number of bankruptcies – Economists from a leftist think tank and a conservative think tank both guess that the  number of bankruptcies from the current shutdown of the economy will exceed the number from the Great Recession.

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Written by Jim Ulvog

April 15, 2020, 9:53 am at 9:53 am

News For CPAs During The Pandemic: FASB guidance on leases – 4/14.

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More info for CPAs. FASB releases a Q&Q for lease issues.  Another round of layoffs seems to be appearing.

4/10/20 – FASB published the following Staff Q&A – Topic 842 and topic 840: Accounting for lease concessions related to the effects of the COVID-19 pandemic – If this issue affects your clients, you need to read the guidance.

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Written by Jim Ulvog

April 14, 2020, 13:41 pm at 1:41 pm

Posted in Accounting, Other stuff

News For CPAs During The Pandemic: AICPA guidance on accounting, reporting, and auditing – 4/10

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Guidance from AICPA can help with financial reporting and auditing. Also, there is a need for COBOL programmers.

If you had not noticed, the California Society of CPAs is offering a lot of CPE webcasts on tax and auditing issues during the pandemic. Many of them are free. Yeah, no charge CPE. How ‘bout that?

4/8/20 – Journal of Accountancy – AICPA issues audit and accounting guidance FAQs on COVID-19 – The AICPA published a 21 page document on accounting and audit issues: Audit Matters and Auditor Reporting Issues Related to COVID19

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Written by Jim Ulvog

April 10, 2020, 8:33 am at 8:33 am