covid-19 and your client’s economic environment
TRANSCRIPT
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COVID-19 and Your Client’s Economic Environment
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OverviewToday we stand in a new economic environment, one where the norms of the business world have been suspended. The pandemic is confronting every level of the U.S. economy and our clients are facing unprecedented challenges. This presentation discusses:
The Economic Landscape under COVID-19
PPP, EIDL, SBA, and the CARE ActUnemployment, Furloughs, and Compassionate Layoffs
Modifications for Support and Changes in Circumstance
How does COVID-19 Affect the Value of a Business?
Presented by:
Jeremy J. Salvador, CFE, CFS, CFC, CTC, CAC, CCC, RFI, CIFA, ASBC of Miod and Company, LLP
Andrew Hunt, MBA, CPA, ASA of White, Zuckerman, Warsavsky, Luna and Hunt, LLP
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The Economic Landscape under COVID-19
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More than 4 in 10 adults say they or someone in their
household has lost a job or taken a pay cut due to COVID-19
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Employment in total nonfarmOver-the-month change, March 2020
Bureau of Labor Statistics, Current Employment Statistics survey, April 03, 2020. Data are preliminary.
Industries Most Affected:o Leisure & Hospitalityo Education & Health
Serviceso Professional Serviceso Retail
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Change in Median Net Worth, relative to 2007
Note: Each age group’s median net worth in 2010, 2013, and 2016 was compared to the same age group’s respective level in 2007
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PPP, EIDL, SBA, and the CARES Act
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Paycheck Protection Program
Expanded$349 billion + $310 billion
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Economic Injury and Disaster Loan
Expanded$562 billion + $60 billion
Max Loan Down from $2M to $150k
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The Coronavirus Aid, Relief, and
Economic Security Act
Ø Direct Payments
Ø FPUC
Ø Payroll Taxes
Ø Use of Retirement Funds
Ø 401(k) Loans
Ø RMDs Suspended
Ø Charity
Ø Small Business Relief
Ø Net Operating Losses
Ø Excess Loan Limitations
Ø Interest Expense Limitation
Ø Large Corporations
Ø Hospitals and Heath Care
Ø Coronavirus testing
Ø States and Local Governments
Ø Agriculture
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Unemployment, Furloughs,and Compassionate Layoffs
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UnemploymentØCalifornia unemployment insurance
ØA joint state-federal program that provides cash benefits to eligible workers who are unemployed through no fault of their own. Benefits are based on a percentage of your earnings over a recent 52-week period.
ØCalifornia lost 3.6 million jobs, about 18.8% of our labor force. We rank 15th among the other states in the nation.
Economists estimate that in April we reached a 16.1% unemployment rate
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FurloughsØWhat is a furlough?
ØA furlough generally refers to a mandatory period of time off work without pay initiated by the employer and intended to be a temporary or limited duration.
ØAn employer may use a furlough rather than a permanent layoff or termination because the business downturn is expected to be temporary.
ØTypically health care benefits are still paid by the employer
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Compassionate LayoffsSeven Steps for Compassionately Laying off your staff:
1) Be Transparent2) Be Ready3) Have a Process4) Rely on Experts5) Use a Scalpel, not a Hammer6) Keep the Keepers7) Invest Accordingly
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Compassionate LayoffsØFor many, unemployment compensation may be higher than regular
wages. In California, those making $54,000 a year or less are benefitting from a higher unemployment payout.
ØCalifornia Maximum Weekly payout: $ 450 California Unemployment
+ 600 Federal Pandemic Unemployment Compensation (FPUC)$ 1,050 Maximum Benefit per Week
That’s $26.25 an hour, or $54,600 annualized
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Compassionate Layoffs
0
200
400
600
800
1000
1200
Unemployed Employed
Comparison of CompensationUnemployed vs. Employed
CA Unemployment Federal Benefit Earnings
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Modifications for Support andChanges in Circumstance
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A Change in Circumstances
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Quantifying Loss of Income
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Preserving Retroactivity
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How does COVID-19 Affect the Value of a Business?
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Macro Shock Events –What makes this one
different?
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Types of Recoveries & Business Value –
A base level understanding
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Different Businesses Effected Differently – The market
segment is the primary key
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Dates of Value, Alternate Valuation Dates, and FC §2552 –
Practical Considerations
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Subsequent Events and “Known and Knowable” standard –
A needed variance?
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“Real World Solutions –Can we use these?
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Normalized Earnings and Representative Periods –
The Rubber Meets the Road
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Reasonable Compensation and Performance Issues –
Where does this topic fit into this mess?
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PPP Loans and EIDL –Everyone’s First Question
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Willingness and Needs to Settle – One would think
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Income Available for Support Reports – Riddled Again
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Support Considerations / Strategies – Simply Put