The COVID-19 Pandemic has had a profound impact on the global and U.S. economic and business environments. In addition to the health impacts, the Pandemic led to legislation intended to provide economic relief to businesses and individuals. The Coronavirus Aid, Relief and Economic Security (CARES) Act, H.R. 748 was enacted by Congress on March 27, 2020. Other recent legislation helps businesses deal with a dramatically changed and volatile economic environment. The AICPA CARES Act Valuation Impact Task Force published “Valuation Considerations Related to the CARES Act”, which provides a useful summary of provisions of the CARES Act and other legislation that impacts businesses and business valuations.
Key issues of importance discussed in the AICPA CARES Act publication include:
Implications of the “Known or Knowable” Concept for Valuations. There is general agreement that valuations can consider developments which were “known or “knowable” as of a valuation date. The AICPA publication discusses the dates when the COVID-19 Pandemic was “known or knowable” and, hence, a relevant consideration for business valuations.
Valuation Implications of the CARES Act. The CARES Act provides economic assistance for American workers, families, and small businesses. The AICPA publication provides an overview of key provisions of the CARES Act that merit consideration by business appraisers.
Valuation Implications of the Paycheck Protection Program (“PPP”). The PPP provides access to cash so that businesses can continue paying their employees and other specific expenses.
Valuation Implications of the Emergency Economic Injury Grant (“EEIG”). EEIGs provide an emergency advance of up to $10,000 to small businesses and private nonprofits harmed by COVID-19.
Valuation Implications of the Economic Injury Disaster Loan (“EIDL”). EIDLs are lower interest loans of up to $2 million available to businesses, with principal and interest deferment at the Administrator’s discretion, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
Valuation Implications of the Small Business Debt Relief Program (“SBDRP”). SBDRPs assists borrowers with certain loans with the U.S. Small Business Administration (SBA). Under the SBDRP, the SBA will pay six months of principal, interest and associated fees on behalf of borrowers with current, non-deferred 7(a) loans, 504 loans or Microloans, as well as, new 7(a), 504 or Microloans disbursed before September 27, 2020.
The American Institute of CPAs (AICPA) is the world’s largest member association representing the accounting profession, with more than 431,000 members, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.
The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialty credentials for CPAs who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. Through a joint venture with the Chartered Institute of Management Accountants, it has established the Chartered Global Management Accountant designation, which sets a new standard for global recognition of management accounting.