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Apr 21, 2020

CFOs gain clarity over how to report on Covid-19, says survey

Four out of five finance chiefs expect revenues, profits or both to fall this year, reports PwC

CFOs are becoming clearer about what changes they need to make to financial disclosures in light of Covid-19, according to research from PwC.

In a survey of US CFOs, only 13 percent say it’s difficult to assess where Covid-19 will be discussed in upcoming financial reporting. That compares with 24 percent two weeks ago when the survey was conducted among US and Mexico-based CFOs. 

‘Most companies will face a challenging period ahead as they close the books remotely and prepare financial statements,’ write the report authors. ‘They may have new or different financial reporting matters to consider, and some may have to deal with lower materiality thresholds based on company performance.’

The survey asked financial leaders to say where they expect to include a discussion about Covid-19 in their external reporting. The most popular response is risk factors (selected by 50 percent), followed by financial statements, including footnotes (47 percent) and MD&A results of operations (46 percent).

Almost two fifths (37 percent) say they plan to discuss the impact of the outbreak in an earnings release, while just 6 percent do not plan to include a discussion of Covid-19 in their upcoming reporting. 

Companies around the world are struggling to understand the potential impact of Covid-19, which has led to shutdowns across entire industries and forced most employees to work from home. 

In response to the crisis, many companies have chosen to revise or cancel financial forecasts, while also reining in buyback programs and dividends. Between March 16 and April 12, 341 US companies withdrew annual guidance, according to an analysis of SEC filings conducted for IR Magazine by Intelligize. 

The PwC survey finds 81 percent of CFOs are expecting a decrease in profits, revenue or both this year. ‘The extent of the impact will amplify potential impairment and business viability financial-reporting considerations for many companies,’ state the report authors.

Finance chiefs also indicate that they expect the impact of Covid-19 on their businesses to last longer than previously thought. Just 22 percent of respondents say, if the outbreak ended today, it would take less than a month to get back to business as normal. When the survey was conducted in the week of March 9, 66 percent of respondents thought they could fully recover in this timeframe. 

The survey was conducted between April 6 and April 8 and includes the views of 313 CFOs and finance leaders, says PwC.