PJ Patel, Co-CEO and Senior Managing Director of VRC, was featured in Bloomberg Tax. The article focuses on a number of potential financial statement impacts as business disruptions from the coronavirus have already impacted earnings for some companies. One observer notes “this is probably the most challenging time that global companies have had in the area of accounting and taxation.”
Related to goodwill impairments, the financial impact from the virus could be assessed as a triggering event if a significant deterioration in economic conditions occurs for companies that are operating overseas. “All the optimism from announcing the original deal can evaporate when the markets slide,” said Patel. “The markets being down and then less business activity will result in lower earnings, which then could cause companies to say, ‘Our outlook has changed’.”
Since Q4 2019, Patel has been active in conversations with the FASB as it considers potential changes to how goodwill—intangible assets that are reflected in a merger & acquisition context by the premium paid over the value of identified assets—is valued, periodically tested for changes in value (or “impairment”) and reflected in financial statements.
Read the full article in Bloomberg Tax here.