US SEC instructs firms to include coronavirus risks in financial reports

The coronavirus situation continues to persist, and it is starting to affect the world in every way that experts were afraid it might. However, the US SEC decided that its impact should be transparent, which is why it instructed listed companies within the country to include coronavirus risks in their financial reports.

The agency published a statement this Wednesday, claiming that many companies have operations in China, as well as other areas that may have been affected by the virus outbreak. Even if the companies themselves do not operate in these regions, they might have distributors, suppliers, or customers in these areas.

As such, it is important to include the risks, despite the fact that actual effects are difficult to assess. As a result, the SEC encouraged US firms to work with their auditors and make sure that their financial reporting remains as robust as possible in light of the current circumstances.

SEC claims that the virus’ effects can impact investment decisions

The announcement comes less than a month after the regulator’s Chairman, Jay Clayton, directed the staff to monitor US companies’ disclosures regarding the coronavirus’ potential and existing effects on the businesses.

Back then, Clayton stated that the virus and its effects are quite uncertain, especially when it comes to businesses. Actual effects may depend on numerous factors that go beyond the knowledge and control of issuers. However, he believes that it is important to know how issuers plan to deal with the uncertainty, and how they might respond as the events continue to unfold.

Clayton concluded by saying that these factors are a material that needs to be included in investment decisions, and so transparency is a big necessity.

So far, there were over 2,000 reported deaths due to the virus, as of February 20th. Meanwhile, Worldometer reports that there are currently over 75,000 confirmed cases and that the virus managed to spread to 30 different countries and territories.