COVID-19 Impact on Nonprofits’ Financial Statements
Published on March 17, 2020
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.
This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.