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IRS Suspends Certain Compliance Programs Due to COVID-19
The IRS has announced that it will provide relief to taxpayers that ranges from easing payment guidelines for installment agreements and Offers in Compromise, to postponing certain compliance actions. For taxpayers with an existing installment agreement, the IRS is suspending those payments during the suspension period (which began April 1); interest will continue to accrue, however, on any unpaid balances. Furthermore, the IRS will not default any installment agreements during the suspension period. Taxpayers who are unable to fully pay their federal taxes can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS.
Healthcare Accountants: Coronavirus Came at Pivotal Reporting Period
The coronavirus (COVID-19) pandemic coincided with the most significant reporting and tax season of the year for the healthcare sector, according to accounting professionals. “[The pandemic] comes at a pivotal time in financial reporting, with most years end completed, yet a significant subsequent event occurred that would have to be evaluated relative to the 12/31 years ends under audit,” said Steven Shill, Partner and National Leader, BDO Center for Healthcare Excellence & Innovation, at BDO USA. “Although the conclusion is that the subsequent event is not a ‘non-recognized event’ for year ends through to January 30, 2020—the date that the [global] emergency was declared—it is still relevant to going concern and debt modification considerations.” Companies would look to Accounting Standards Codification (ASC) Topic 855, “Subsequent Events,” to determine whether they either have a recognized event or a nonrecognized event. The two exceptions, Shill said, are evaluation of a going concern (i.e., whether the company survives within the next 12 months) and any subsequent debt modifications that must take place as a result of COVID-19 issues.
Companies’ Goodwill Impairments Expected to Substantially Spike this Year
Companies will likely report more goodwill impairments than they might have planned for the first quarter of this year because the COVID-19 pandemic will cause them to decipher whether the intangible assets declined in value, according to comments from accounting practitioners. The COVID-19 crisis comes at a time when FASB rules that simplify the test for goodwill impairment take effect for large public companies. “Clearly, the COVID-19 pandemic is a triggering event that would cause many companies to test goodwill for impairment on an ‘interim basis’–i.e., before the scheduled annual testing date,” said Scott Ehrlich, president of Mind the GAAP, LLC. “Because of the overall decline in market values, more reporting units would likely fail the goodwill (impairment test… the fair value) of the reporting unit will be less than its carrying amount.”
Auditors Obligated to Provide High-Quality Audits during Crisis
With the unprecedented challenges presented by COVID-19, the PCAOB has issued a staff guide to remind independent auditors of their obligations to follow applicable rules and standards diligently as they complete their audit work. The staff guide, COVID-19: Reminders for Audits Nearing Completion, says that, as of the issuance date of April 2, 2020, auditors who are close to completing audits are dealing with time-sensitive and complex issues, and appropriate responses to COVID-19 issues will depend upon each audit’s circumstances. The staff guide thus does not provide detailed guidance on how to apply the PCAOB’s standards. “The COVID-19 crisis is having a significant impact on investors, issuers, and auditors alike,” PCAOB Chairman William D. Duhnke III said in a statement on April 2, 2020. “This spotlight is intended as a reminder that adherence to our standards takes on added importance as investors depend now, more than ever, on the integrity of financial statements.”
No Deferral Planned for Interest Rate Reform Standard
GASB has said its decision to defer the effective date of some critical accounting standards to ease implementation hurdles brought on by the COVID-19 pandemic will not include rules on reference rate reform. The board proceeded to issue GASB Statement (GASBS) 93, Replacement of Interbank Offered Rates, on April 2, 2020. The decision means that rules for benchmark interest rates would apply to reporting periods ending after December 31, 2021; the remaining requirements are effective for reporting periods beginning after June 15, 2020. “I certainly agree with staff recommendations as far as continuing to maintain the effective dates,” GASB member James Brown said during the board’s meeting, which was held online. “I believe that LIBOR is flawed anyway, versus the replacement of LIBOR, because of the variability in there with regard of the credit risk component and going to a rate that probably has less credit risk into it,” Brown said. “I think the new rate is probably better in terms of getting closer to a risk free [rate], and so I think it would improve financial reporting to get rid of it as of the date that’s proposed currently.”