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Financial reporting implications of disasters
Financial Reporting Alert 17-6
This Financial Reporting Alert highlights some of the financial reporting implications of disasters for entities reporting under U.S. GAAP. Those implications can include the accounting for asset impairments, the income statement classification of losses, insurance recoveries, and additional exposure to environmental remediation liabilities. The newsletter also provides information on how entities affected by recent storms may be able to apply for relief from SEC filing requirements.
This Financial Reporting Alert has been revised to reflect an update related to the SEC’s October 16, 2018, announcement that it is providing certain regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, municipal advisers, and others affected by Hurricane Michael (see the discussion in the SEC Relief section in the pdf) and an update related to IRS announcements regarding filing or other tax relief for areas affected by Hurricanes Florence and Michael (see the discussion in the Tax Authority Relief section in the pdf).
This Financial Reporting Alert highlights some of the financial reporting implications of disasters for entities reporting under U.S. GAAP. North America has recently been affected by Hurricane Florence, and with several weeks of hurricane season left, it is possible that other storms may follow. Disasters can also take other forms, such as wildfires, earthquakes, or the September 2001 terrorist attacks on the World Trade Center in New York and the Pentagon outside Washington, D.C.
In addition to tragic loss of life, disasters can cause widespread damage and destruction of property and varying degrees of business activity disruption in affected regions and, in some cases, other areas of the world. Some entities may have principal operations in the affected area, while others may have ancillary operations or interests in the affected region. Other entities may be affected as a result of relationships with major suppliers physically located in the affected region. In addition, insurance entities may experience significant losses as a result of a disaster.
A number of financial reporting implications can arise as a result of a disaster. Such implications can include the accounting for asset impairments, income statement classification of losses, insurance recoveries, and additional exposure to environmental remediation liabilities. This Financial Reporting Alert identifies potential implications and applicable authoritative guidance. The financial reporting implications discussed in this Financial Reporting Alert are not intended to be all-inclusive but as a starting point for thinking about the issues that might arise.
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Financial Reporting Alerts highlight up-to-the-minute accounting, regulatory, or other developments that may require immediate action by our professionals and clients or that may affect current financial reporting and disclosure.