Accounting and reporting implications resulting from the Ukraine war

Assessing the impact

It is important that companies consider their direct and indirect exposure to the impacts of the war, including related sanctions. The accounting and reporting implications could be numerous, particularly for those with material subsidiaries, operations, investments, contractual arrangements, or joint ventures in Russia.

The broad impact of war

Though the true impact of war is unclear, businesses worldwide can feel its financial effects. In addition to the impact of the war on entities that have operations in Russia, Ukraine, or neighboring countries (e.g., Belarus) or that conduct business with their counterparties, the war is increasingly affecting economic and global financial markets and exacerbating ongoing economic challenges, including issues such as rising inflation and global supply-chain disruption. Because of its broad impact on these macroeconomic conditions, companies globally may need to consider the war’s effect on certain accounting and financial reporting matters. The degree to which entities may be affected depends largely on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions, and reactions to ongoing developments by global financial markets. Although it may be too early to assess the war’s broad implications, an entity’s related accounting and financial reporting considerations may be similar to those arising from a severe economic downturn or catastrophic natural disaster. This document downloadable at right summarizes some of the relevant potential impacts arising from the Russia-Ukraine war that executives may need to consider.

SEC reporting and disclosure considerations

In a manner similar to the treatment of other emerging risks, entities may need to add to their SEC filings disclosures about the impact of the war. When considering impacts, registrants should take into account broad potential issues such as closure or damage to facilities, disruption to operations and supply-chains, regulatory changes, the risk of increased cyberattacks, and others.

Sections of a filing where registrants most commonly provide disclosures about emerging risks include risk factors, MD&A, and the footnotes to the financial statements. While these disclosures would most often be included in a Form 10-K or Form 10-Q, providing a Form 8-K might give investors more timely information regarding a registrant’s financial and operating status or the potential impact on revenue and earnings guidance for future periods.

Broad financial reporting and accounting considerations

It is important that entities carefully consider their unique circumstances and risk exposures when analyzing how the accounting impacts arising from the war may affect their financial reporting. Specifically, financial reporting and related financial statement disclosures need to convey all material current or potential effects arising from the war. The significance of the issues will of course vary depending on an entity’s industry and circumstances, but we believe that those related to the following topics could be among the most pervasive and challenging:

  • Recoverability and impairment of nonfinancial assets
  • Loss of control, the ability to exercise significant influence, or cessation of operations
  • Foreign currency
  • Subsequent events

Internal control considerations

Entities should consider providing disclosures about the effects, if material, of the Russia-Ukraine war on their internal controls and disclosure controls and procedures. As a result of the war’s impact, entities may need to implement new internal controls or modify existing ones. Entities must disclose in their quarterly or annual filings in Item 4 of Form 10-Q or in Item 9A of Form 10-K (or, for foreign private issuers, in Item 15 of Form 20-F) any changes in internal controls that have materially affected, or are reasonably likely to materially affect, their internal control over financial reporting.

Take a deeper dive

For more detailed discussion on each of the areas discussed in this point of view, please refer to Deloitte’s "Financial Reporting Alert 22-1 on Financial Reporting Considerations Arising From the Russia-Ukraine War."

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