SEC staff guidance addresses pandemic-related disclosures

By Ken Tysiac

Public companies need to carefully consider their obligations in disclosing the coronavirus pandemic’s effect on their operations, liquidity, and capital resources, according to staff guidance issued Tuesday by the SEC Division of Corporation Finance.

The division is monitoring how companies are disclosing the effects and risks related to the pandemic on their businesses, financial condition, and operating results. The staff guidance has no legal force or effect, but it provides the views of the Division of Corporation Finance on pandemic-related issues.

The guidance encourages companies to provide disclosures that help investors evaluate the current and expected impact of the pandemic through the eyes of management. As facts and circumstances change, companies are advised to proactively revise and update disclosures.

Companies are encouraged to carefully disclose information on topics such as a transition to telework, supply chain and distribution adjustments, and suspensions or modifications to operations to comply with health and safety guidelines.

The guidance encourages robust and transparent disclosures about how companies are dealing with liquidity and funding risks and how they are evaluating whether this information should be included in management’s discussion and analysis.

The division also includes questions to consider regarding disclosure of financial assistance provided through the government by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.

In addition, the guidance states that management should consider whether conditions and events, taken as a whole, raise substantial doubt about the company’s ability to meet its obligations as they become due within one year after the issuance of the financial statements.

When substantial doubt exists about a company’s ability to continue as a going concern or the substantial doubt is alleviated by management’s plans, the guidance says management should provide the appropriate disclosures.

SEC Chief Accountant Sagar Teotia also issued a statement Tuesday that mentioned the role of the SEC Office of the Chief Accountant (OCA) on high-quality financial reporting. Teotia’s comments included:

  • “Companies should ensure that significant judgments and estimates are disclosed in a manner that is understandable and useful to investors, and that the resulting financial reporting reflects and is consistent with the company’s specific facts and circumstances.”
  • “If any change materially affects, or is reasonably likely to materially affect, an entity’s [internal control over financial reporting], such change must be disclosed in quarterly filings in the fiscal quarter in which it occurred (or fiscal year in the case of a foreign private issuer).”
  • “Auditor independence is a shared responsibility among audit committees, management, and their auditors. We believe that when each of these groups work together, it fosters the most effective environment to achieve compliance with the independence rules, and we remain available for consultation on these matters.”

Ken Tysiac ( is the JofA’s editorial director.


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