8-K Filings Increase During Pandemic

COVID-19 has had a dramatic impact on all businesses globally. However, public companies are specifically obligated to communicate the pandemic’s impact to stockholders, employees, regulators, and the public.

According to BDO’s 2020 Board Pulse Survey, public company boards are prioritizing transparency and communication around financial reporting and disclosures. Some findings include boards prioritizing the following:

  • 73% increased disclosure around new or emerging risks to the business
  • 46% significantly increased time/effort devoted to accounting estimates and forecasts
  • 42% increased disclosure on liquidity
  • 28% considered recording an asset impairment(s)

Disruptions to business and financial condition usually trigger reporting of various Form 8-K items. Such disruptions include new liquidity needs, market volatility, and of course, the current pandemic. As a sign of the times, 8-K filings, particularly with Material Impairment items, have increased 182% from Q1 to Q3 2020.

Form 8-K Material Impairment Filings in 2020 by Quarter (Source: Apparity)

Uncertainty Necessitates Flexibility

A lot of the underlying analysis and reporting will, of course, fall on the shoulders of the finance team. These unprecedented times are requiring finance teams to consider other factors not normally included in their financial analyses. Liquidity modeling and the like are unlikely to have been tested using parameters for a rare event like a global pandemic.

Being constrained to strict reporting cycles require tools that are flexible, adaptable and easy to manage. The not-so-humble Excel spreadsheet will be the tool of choice for most organizations.

As the CFO or Financial Controller, you can see your teams are working hard, producing results and analysis you need. This productivity is positive yet generating risk at the same time. Hold on— risk?

Consider the frenzy of all this activity— the real-time updates, changes to scenarios, data being constantly input and modified. Can you be certain that no errors are being introduced?

Flexibility Comes with Risks

Excel is an extremely flexible tool. However, it lacks audit trails, change tracking, and the ability to review/ signoff on key changes. Comparing spreadsheet versions, which would be a hugely useful capability, is also not available from Excel out of the box.

Human error is inevitable. Reporting errors to the SEC and regulators can and will have dramatic consequences— fines, damage to company reputation and potentially lawsuits. All on top of an already stressful situation.

Getting Help

In uncertain times, get back to business-as-usual with Apparity’s full spreadsheet lifecycle risk management software. Designed to be unobtrusive in your end-user’s day-to-day yet provide 100% analysis of changes to your critical workbooks.

Prominent companies and financial service organizations choose Apparity because they trust the risk controls Apparity provides for their most sensitive spreadsheets.

About the Author:

Apparity

Jeremy Condie is a recognized subject matter expert in end user computing risk management. His background includes senior sales and marketing positions for blue chip multinational financial and media corporations including JP Morgan, Credit Suisse, Morgan Stanley and Thomson Financial. Jeremy earned his BSc in Electronic Systems Engineering and an M.B.A. at Kingston Business School (U.K.).