March 14, 2022
War in Ukraine: Key Accounting and Financial Reporting Challenges
A few weeks ago, I blogged about the general disclosure considerations for public companies arising from the war in Ukraine, including considerations for companies that have recently completed their earnings cycles and annual report filings. Now, Deloitte has published an in-depth discussion of the key accounting and financial reporting challenges that companies are facing from the Russia-Ukraine war, including those related to SEC reporting and disclosures, forecasting, supply-chain disruptions, recoverability and impairment of assets, loss of control, the ability to exercise significant influence, cessation of operations, foreign currency matters, subsequent events, and going-concern considerations. Deloitte’s alert notes:
It is important that entities aggregate and consider their direct and indirect exposures to the impacts of the war and consider the financial accounting and reporting implications, which could be numerous, particularly those with material subsidiaries, operations, investments, contractual arrangements, or joint ventures in Ukraine and Russia.
Entities with significant suppliers, vendors, or customers in Ukraine or Russia, as well as organizations that lend to or borrow from entities in those countries, also may experience accounting challenges. Even entities that do not have direct exposure to Ukraine or Russia are likely to be affected by the overall economic uncertainty and negative impacts on the global economy and major financial markets arising from the war.
The alert highlights a wide range of impacts that are worth considering when preparing a company’s financial statements and related disclosures, including interruptions or stoppage of production in affected areas and neighboring countries; damage or loss of inventories and other assets; closure of roads and facilities in affected areas; supply-chain and travel disruptions in Eastern Europe; volatility in commodity prices and currencies; disruption in banking systems and capital markets; reductions in sales and earnings of business in affected areas; increased costs and expenditures; and cyberattacks.
– Dave Lynn