Coronavirus and 2019 Financial Statement Disclosures

Published: 03/23/2020

Coronavirus and 2019 Financial Statement Disclosures

Over the last 2 weeks it has become apparent that the crisis surrounding the COVID-19 virus will have serious impacts to the economy of the U.S. Questions have arisen over the need to include a subsequent event footnote to 2019 financial statements. Given that HUD has extended the deadlines for annual reporting, a substantial number of annual reports have not been completed. Accordingly, there are many reports where project financial statements may be required to include a subsequent event footnote.


Possible COVID-19 Footnotes

Multifamily:

Subsequent Event – Coronavirus Pandemic:
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to other countries, including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, multiple jurisdictions in the U.S. have declared a state of emergency. It is anticipated that these impacts will continue for some time. There has been no immediate impact to the Project’s operations. Future potential impacts may include disruptions or restrictions on our employees’ ability to work or the tenants ability to pay the required monthly rent. Operating functions that may be changed include intake, recertifications and maintenance. Changes to the operating environment may increase operating costs. Additional impacts may include the ability of tenants to continue making rental payments as a result of job loss or other pandemic related issues. The future effects of these issues are unknown.

(Note) If the project has rental assistance, the potential for significant collection losses could be mitigated. This change would be reflected appropriately.

Lender:

Subsequent Event – Coronavirus Pandemic:
In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China and has since spread to other countries, including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, multiple jurisdictions in the U.S. have declared states of emergency. It is anticipated that these impacts will continue for some time. There has been no impact to the Company’s operations to date. Future potential impacts to the Company include disruptions or restrictions on our employees’ ability to work, lack of demand for new loans or the borrower’s ability to pay the required monthly payments. Changes to the operating environment may also be impacted. Operations include loan applications, processing or other areas requiring contact with the borrower. These changes may increase operating costs. Further impacts may include increased repurchase risk or loan defaults. The future effects of these issues are unknown.

  • The information contained on this site is designed to provide accurate information in regard to the subject matter covered. However, this site is not a substitute for the promulgated standards or regulatory guidance. The information is provided with the understanding that AHACPA is not engaged in rendering legal, accounting, or other professional advice. If such advice is required, the services of a competent professional should be secured.