The Many Benefits of Accounting Consultants for Corporate Finance: Through COVID-19 and Beyond

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COVID-19 has caused an unprecedented health and economic crisis, and no industry is immune. While many business leaders are engrossed in understanding and responding to the effects of the pandemic on their global operations and business continuity plans, financial departments are working comprehensively to understand the accounting and financial implications. Coupled with the already arduous task of implementing a host of new and complex accounting standards over the past few years, including standards that affect how revenue is recognized and how leases and losses credit are accounted for, the focus on financial services has never been hotter. How corporate finance teams respond to all of these challenges, old and new, could have a significant impact on how a business emerges from COVID-19, and how it performs and grows in a global business economy. post-COVID-19.

All organizations, whether directly exposed or present in areas affected by COVID-19, will need to consider the accounting and reporting implications given the widespread impact of the virus around the world and across industries. . The current and highly fluid market environment makes it even more difficult for finance teams to estimate future earnings and cash flows, prompting them to take a closer look at valuations and assess their assets for potential impairments. At the same time, they are assessing the impacts of the myriad of government and regulatory relief solutions that may be available to their businesses. In addition to all this, availing of available relief often poses its own challenges for a financial function. For example, the SEC recently announced that it is granting conditional extensions to filing deadlines to public companies whose financial reports could be affected by the coronavirus. Yet knowing how and under what conditions a business can qualify for this option can also be a complex exercise.

Documenting complex transactions and their associated accounting conclusions can be extremely difficult for financial services, even before COVID-19, given today’s complex standards for internal controls over financial reporting. Added to this challenge is the expectation of financial services to “do more”, in particular to create value throughout the company. Independent external auditors can certainly help identify applicable guidelines and discuss the application of those guidelines. However, the external auditors are limited by the rules of independence. Taking COVID-19 into account makes the scale of the challenges all the greater.

Rather than going it alone, corporate finance executives may consider hiring accountants and other third-party professionals who can advise them on the more technical accounting and financial reporting issues involved. Here are several ways an effective accounting advisor can help senior financial leaders in the midst of the pandemic and beyond:

  1. Bring an experienced point of view: Beyond existing complex scenarios, i.e. determining whether you are a principal or agent for third-party products that you resell to a customer, or assessing whether the share-based payment awards of your employees should be categorized as a liability or an equity, COVID-19 creates complex, fluid, and in some cases unprecedented scenarios that could make it difficult for preparers to identify the correct accounting. Many businesses want to know how to deal with secured loan changes during the pandemic, account for price concessions in revenue contracts, and consider tax law changes resulting from the CARES Act. Accounting advisors can draw on extensive and diverse experience in all industries, for public and private organizations, to advise you as you reach an informed accounting conclusion. Additionally, they can apply lessons from similar past experiences and help take advantage of available regulatory relief to advise you on possible accounting approaches, help you assess the accounting impacts of potential agreements, and discuss alternative accounting models to help. to structure transactions appropriately.
  2. Plan for future scenarios and resolve tough issues sooner: There are still many unknowns about COVID-19, which means that some accounting conclusions based on the facts available today could change in days or weeks as we learn more about the virus and its impact on businesses. By seeking the advice of an advisor, finance executives can develop multi-pronged accounting approaches for a range of different business outcomes, giving them confidence that a plan is in place, no matter which direction they take. COVID-19. This approach can also help identify and resolve potential issues quickly, reducing last minute fire drills with independent auditors.
  3. Examine alternatives to avoid unintended accounting consequences: The urgency of COVID-19 and the speed at which it is affecting corporate balance sheets is prompting many companies to respond without the luxury of the time it takes to fully consider all available alternatives. Firms that are short on time and resources are more likely to take the path of least resistance when reaching accounting conclusions, even if they suspect that another path may be better. For example, an entity may enter into a transaction that would result in accounting treatment under existing GAAP, but different and more favorable treatment may be available if the entity early adopted a new accounting standard. In the absence of internal resources or bandwidth to perform an in-depth due diligence on their own, organizations can hire accountants to advise them on the desired accounting treatment and ultimately protect the business from harm. unintended accounting consequences.
  4. Explain the impacts of the accounting directives on the main business decisions: Financial and non-financial leaders want to understand the accounting impacts of the strategic decisions their companies are making in the face of the COVID-19 crisis. The need to articulate, in plain English, the accounting and reporting consequences of a particular decision or transaction has never been greater. By advising on the interrelationships between key business decisions and accounting and financial reporting standards and eliminating excessive accounting jargon, advisers can arm business leaders for smarter conversations with key stakeholders, including investors, audit committees and independent auditors.
  5. Manage internal controls related to COVID-19: As businesses adapt to the unique operating environment demanded by COVID-19, internal controls will also need to keep pace. For example, a monitoring activity may need to be revised or created to take into account that it can now be performed remotely or that the personnel who would normally perform it might not be available. Accounting advisors can help finance professionals assess whether an entity’s internal controls are well designed, properly implemented, and functioning effectively. They can determine if existing internal controls can be changed or if new ones are needed and can also advise on how to design and implement them to contribute to their operational effectiveness.

As businesses continue to deal with lost revenue, disrupted supply chains and financial market volatility due to COVID-19, preparing financial statements and planning for the future can remain extremely difficult. Without the right accounting tools and knowledge, companies might miss opportunities to streamline accounting processes and strengthen their financial institutions to weather the storm. All of this makes it essential that accounting and financial reporting be handled in a way that allows the business to recover and thrive.

Steve Barta is an audit and assurance partner at Deloitte & Touche LLP.

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