June 25, 2020Client Alert

SEC Supplements COVID-19 Disclosure Guidance

On June 23, 2020, the Securities and Exchange Commission (SEC) Division of Corporate Finance issued Disclosure Guidance Topic No 9A to supplement Disclosure Guidance Topic No. 9 with additional guidance regarding COVID-19 disclosure considerations. The supplemental guidance comes before the end of the second quarter as public companies turn to drafting quarterly reports. For more information on Disclosure Guidance Topic No. 9, our previous Client Alert summarizes the initial disclosure guidance from the Division of Corporate Finance.

Operations, Liquidity, and Capital Resources

The supplemental guidance addresses the requirement for the ongoing assessment of the impacts of COVID-19 for operations, liquidity, and capital resources disclosures. The staff notes that companies have undertaken or are in the process of undertaking operational adjustments in response to COVID-19 and lists several examples of such operational adjustments, including: transitioning to telework; making supply chain and distribution adjustments; and suspending or modifying certain operations to comply with health and safety guidelines, including operational adjustments made in connection with a transition back to the workplace. Such operational adjustments may be considered material to an investment or voting decision and, therefore, companies should evaluate, and continue to evaluate on an ongoing basis, disclosure obligations.

The supplemental guidance further addresses that due to COVID-19, companies have undertaken or are in the process of undertaking a diverse range of financing activities. The supplemental guidance lists examples such as obtaining and utilizing credit facilities, accessing public and private markets, implementing supplier finance programs, and negotiating new or modified customer payment terms. The staff highlights the disclosure considerations relating to how companies are dealing with short- and long-term liquidity and funding risks in the current economic environment and whether those developments should be included in the Management’s Discussion and Analysis (MD&A) section, both for upcoming quarterly reports and future annual reports.

The staff lists a broad range of questions for companies to answer in light of disclosure requirements and to assess the need for disclosure based on companies’ specific facts and circumstances.

Government Assistance – The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The CARES Act provided federal assistance to companies through loans and tax relief. The supplemental guidance notes that companies that received federal assistance through the CARES Act should consider disclosure requirements in light of the short- and long-term impact of that assistance on their financial condition, results of operations, liquidity, and capital resources. Similar to the discussion on operational adjustments and financing activities, the staff lists a series of questions to aid companies that have received federal assistance to help navigate disclosure requirements.

A Company’s Ability to Continue as a Going Concern

The staff notes that management should consider all conditions and events that, if taken as a whole, would raise substantial doubt on the company’s ability to continue as a going concern. Such substantial doubt or management’s plans to alleviate such substantial doubt should be addressed in relevant disclosures within the financial statements and the MD&A section, as applicable. Similar to the above, the staff lists several questions for companies to consider when evaluating disclosure requirements.


As with all guidance from the Division of Corporate Finance, this guidance reflects the views of staff and has no legal force or effect. This guidance is not a rule, regulation, or statement of the SEC nor has the SEC approved or disapproved the content of this guidance. The staff guidance may be updated as the situation evolves.

Michael Best’s Securities & Capital Markets team advises public companies and investment advisors on compliance with the SEC regulations. Please do not hesitate to contact a member of the Securities & Capital Markets team for additional information on this guidance.

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