Some Businesses Gloss Over Pandemic’s Impact On Revenue

Many businesses have not accurately reported the impact of the pandemic on their bottom line, The Wall Street Journal reported on Tuesday (Feb. 23).

Financial metrics don’t have to follow generally accepted accounting principles (GAAP), which makes it hard for investors to get a good picture of what a company’s financial landscape looks like, the news outlet noted.

For the quarter that ended in December, roughly one out of three companies put a dollar amount on the impact of the pandemic in their earnings, according to data from Calcbench, per the Journal. 

The longer the pandemic lasts, the more difficult it will be for businesses to decipher one-time coronavirus expenses, said David Knutson, vice chair of the Credit Roundtable, which represents institutional investors.

“I think there will be a fraction of companies still clinging to this excuse,” he told the news outlet.

The U.S. Security and Exchange Commission (SEC) doesn’t require businesses to follow a particular protocol when reporting coronavirus-related expenses and income. The only requirement is that companies make sure comments on the effects of the pandemic are factual and not misleading in any way.

About 25 percent of S&P 500 companies in 2020 reported an adjusted figure for earnings before interest, tax, depreciation and amortization, or Ebitda. “About one in 10 of those companies disclosed adjusted Ebitda because of Covid-19 during the three quarters through December 2020,” according to data provider MyLogIQ, per the WSJ.

Regulators are just now starting to scale up inquiries into possible coronavirus disclosures by companies. A senior SEC official issued a warning in December that companies “should be consistent in positive and negative adjustments when showing the impact of the pandemic,” the Journal said.

Corporate confidence hit a new high last week at 73, up from 64, according to the monthly Conference Board Measure of CEO Confidence report. Some 82 percent of CEOs surveyed indicated they were anticipating a bounceback of the economy over the next six months.