COVID-19 Impact on Nonprofits’ Financial Statements
Like many businesses, nonprofits could be negatively impacted by COVID-19 through lost revenue, productivity, and additional expenses. As a result of COVID-19, many organizations have canceled meetings due to potential health risks, travel restrictions and reputational risks. The financial impact of these cancellations may be significant and could require additional disclosures and/or commitments in the audited financial statements as part of the subsequent events analysis.
The disclosure of significant commitments and contingencies as of the balance sheet date is required. Typically, a disclosure of significant hotel commitments based on current contracts is included in the financial statements. However, the nonprofit and auditor need to evaluate the subsequent event disclosure given these commitments may become due as a result of the cancellation. The subsequent event disclosure should discuss the nature of the event, and the potential impact on any significant revenue changes and additional meeting cancellation expenses this coming year.
When meeting revenue is a significant component of their financial operations, nonprofits should evaluate the cancellation of these meetings to their overall financial position and consider the need to disclose pro forma data.
If you have any questions about this and its impact on your organization, please contact us.