April 28, 2022

War Disclosure Considerations: Financial Statement Impacts

As we move through earnings season, we are actually seeing a significant amount of disclosure regarding the impact that the war in Ukraine and the associated actions against Russia and its allies is having on the financial performance of public companies.

At a recent conference, we were discussing the range of financial statement impacts that the war in Ukraine could have, and companies and auditors are definitely focusing on these considerations. One of the key areas is impairments, as the war and the economic impacts could impact the valuation of company assets, including the actual destruction of assets and operations. Further, many companies are grappling with the fallout of ceasing business operations in Russia and Belarus, as well as the prospect of government confiscation of property in those countries. The economic impacts of the war also bring other problems, including the prospect of significant currency fluctuations and hyperinflationary economics. Finally, the disruption brought about by the war and the economic consequences can cause companies to deal with cash flow problems and, even worse, going concern considerations. Investors will no doubt be laser-focused on these issues, and as the war drags and the sanctions tighten the impact of these and other issues will become more and more pronounced.

For more discussion of the financial statement impact of the war, take a look at this PwC memo in our “Ukraine Crisis” Practice Area.

– Dave Lynn