Securities regulators have been pumping out guidance, alerts, warnings, and other missives like crazy lately; explaining what they expect firms to disclose about risks related to Covid-19.

For example, the Securities and Exchange Commission published a statement on April 3 listing numerous items in the financial statements that will need extra attention, because those items can involve a lot of subjective judgment from a firm’s executives — and Covid-19 such a profound challenge to corporate operations, that those judgments could come under severe strain.

On the SEC’s list:

• Fair value and impairment considerations
• Leases
• Debt modifications or restructurings
• Hedging
• Revenue recognition
• Income taxes
• Going concern
• Subsequent events
• Adoption of new accounting standards

Calcbench has extensive data on, well, all of those issues; and you can review our specific research on leases, impairments, taxes, and revenue recognition on our Research page if you like.

Of course, all that research was published before Covid-19 struck. In the fullness of time, we’ll publish fresh research on how the virus is affecting or changing corporate disclosures now.

We did, however, want to call out one item on the list where we’re already seeing lots of action: subsequent events.

A subsequent event is a material item that happens after a firm’s quarterly or annual period ends, but before the firm files its corresponding 10-Q or 10-K. So the firm must include some mention of that event and describe its possible effects as much as possible. Basically, it’s an epilogue to the filing that says, “This other thing just happened, and we know it will be a big deal, so look for more detail later.”

One good example is Copa Holdings ($CPA), a South American commercial airline that trades on the NYSE. Copa filed its latest annual report on April 8, for the fiscal year ending on Dec. 31, 2019 — which means that Covid-19 was included as a subsequent event. Copa had lots to say on the subject. Among its disclosures…

• Sales for medium-term 2020 are down at least 80 percent compared to the year-ago period
• The company has tapped a $300 million line of credit
• All non-essential capital expenditures have been frozen

Copa also said it can refinance some of its aircraft fleet and spare parts and tap a few other credit facilities, which altogether could scrape up another $400 million. So that, plus the $300 million already tapped, would be another $700 million in cash; and Copa already had $1 billion in cash on hand as of March 15. Plus, Copa says it can prune back operational expenses so that its monthly cash burn should be around $70 million for the rest of the year.

The bottom line: Copa “anticipates that these initiatives to obtain additional sources of liquidity, along with measures to contain operational expenses and non-essential capex outflows, will provide ample resources to endure a prolonged downturn in demand.”

We leave it to analysts following Copa to decide how reassuring all that is, but it is a lot of disclosure.

We’ve seen a lot of firms including a subsequent event in their filings lately, almost all of them citing Covid-19 (plus, occasionally, other events). Just last week we had a post looking at firms tapping lines of credit to bolster their defenses against the virus, and all the examples were subsequent events.

The SEC clearly believes Covid-19 warrants disclosure ASAP, and if that means including it as a subsequent event, so be it. Audit firms have also been told by their regulator to keep a close eye on what firms are saying about Covid-19, including how firms treat it as a subsequent event.

Calcbench tracks subsequent events via our Interactive Disclosures page. Typically you’ll find it listed under “Other” in our pull-down menu of disclosure options. You can also just read through all of a firm’s disclosures, and watch for subsequent events at the very bottom of the list.

By the end of Q2, Covid-19 disclosures will be part of every firm’s standard filings. Then the exercise will be more about studying how the virus is affecting revenue estimates, lease concessions, impairment of assets, and more. Calcbench will be devoting more attention to all of those issues as soon as we see examples to cite.