Weathering the Storm Part 5: Restructuring Considerations
Atlantix Partners | June 2, 2020
As companies consider restructuring strategies, they should evaluate the accounting and cash impact of restructuring all or a portion of their operations
- Involuntary terminations – charges may need to be recognized upfront vs. over service period and may result in reduction of future employee expense
- Contract termination costs – could require immediate recognition of entire liability at PV vs over remaining term
- Shutdown or consolidation of facilities and relocation of employees – upfront recognition of liability at PV and may result in future cash savings
- PV accounting – requires judgment in the timing and estimates of expected DCFs
- Potential asset impairments (i.e., fixed assets, right of use leases) and reduction of future depreciation expense for cancellation of leases, plant shutdowns, etc.
As companies consider their strategy to endure this pandemic, which could put a prolonged negative impact on liquidity and operating results, they should also proactively identify accounting and cash impacts for restructuring activities. We can help your company be ready for this.