Accounting and reporting implications resulting from the Ukraine war

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.