How accounting, finance can navigate regulatory reporting complexity during the pandemic
Massimo Marinelli of EY Canada on staying committed to business fundamentals during COVID-19
TORONTO – For corporate accounting and finance teams, providing timely and meaningful disclosures about the potential impact of COVID-19 on your company’s financial position, performance and viability — plus communicating proactive measures to manage risk — is one way companies can help stem uncertainty and maintain trust with customers and shareholders. The challenge for auditors and audit committees will be to keep pace with changes to key performance indicators of financial condition and operating performance, while complying with shifting regulatory obligations amid the crisis.
The Canadian Securities Administrators (CSA) recently published temporary blanket relief for market participants on a range of regulatory filings. And federal and provincial governments continue to announce new measures to provide financial and nonfinancial assistance. The Canada Revenue Agency also extended certain filing deadlines.
The fluid nature of the pandemic means that companies must actively monitor the current and potential measures that COVID-19 could invoke from governing regulatory bodies and update financial reports accordingly. While there’s a lot going on, sticking to the basics can help organizations simplify plans and stay on course. There are a few tried and true ways for businesses to navigate regulatory complexity as they prepare for the upcoming reporting period.
First, ensure you’re up to speed on changes to your compliance requirements. Issuers, investment funds, registrants, certain regulated entities and designated rating organizations all stand to gain from a 45-day filing extension covered under the CSA’s blanket relief measures. But with that deferral, many debt agreements stipulate a timely delivery of financial services. Stay current, understand how this could impact your deliveries and find out exactly how the CSA’s relief may — or may not — apply to you.
Corporate accounting and finance teams, auditors and audit committees will all be challenged by the coronavirus pandemic to provide timely and meaningful disclosures to stakeholders. (RAWPIXEL)
Next, explore your exposure. Chances are, you already have a good understanding of where your business will face material negative impacts through scenario planning. Assessing what you’ll need to disclose represents a continuous process right now. Things will keep evolving during this pandemic and beyond. In the years following the 2008 global financial crisis, we saw a real shift towards the way investors and regulators assessed and interpreted nonfinancial performance. I expect we’re going to see more of that in the months and years ahead as stakeholders continue to pursue a more robust understanding of corporate value.
For now, getting clarity on negative impacts, understanding your exposure, and updating your disclosure plans along the lines of your fiscal calendar milestones is important. Consider: Are operational disruptions going to trigger a change in circumstances that leads to asset impairments? Do you need to revisit accounting estimates? What impact will this have on hedging relationships? Ask the questions now, and continue asking them regularly.
Last but not least, the way you communicate with stakeholders just became a whole lot more important. There’s an innate tendency to shy away from communicating when times are tough. In reality, this is the most critical time to have a voice. Ensuring internal audiences hear from you is essential, but don’t forget about external stakeholders. The approach should be informed by a cross-functional team of leaders (from communications to legal to compliance) to capture the right audiences and distill the right messages.
Even the best communications plans may struggle to stand up in the face of global events with COVID-19 magnitude. But your efforts to communicate transparently now have the power to build and reinforce stakeholder trust.
There’s nothing easy about what we’re collectively working through right now. Staying committed to the business fundamentals that got you this far can be a valuable tool in your COVID-19 kit. Informing yourself, understanding vulnerabilities and communicating effectively are always good strategies.
Massimo Marinelli is the EY Canada Managing Partner — Assurance. For more COVID-19 insights, visit https://www.ey.com/en_ca/covid-19.