Case:

It is March 15^th. You are auditing the 10-K of Broad Financial Insurance Group (BFIG). BFIG is a small, publicly traded company that does not meet the requirements for accelerated filing. Your review is the final review prior to their submission to the SEC.

BFIGs CEO, B. Kirkland idolizes Warren Buffet and BFIG follows the model of Berkshire Hathaway, just on a much smaller scale. Approximately 25% of BFIGs assets are equity securities, accounted for under the fair value method. BFIG also owns 22% of Key West Restaurant Corp., with the equity method used to account for the investment. BFIG did not elect the fair value option at the time of acquisition of Key West Restaurant Corp. Key West Restaurant Corp. operates tropical themed casual dining/bars in shopping malls along the east coast.

BFIG released earnings on February 10^th, the prior to the recent market turmoil. Earnings in 2019 increased by more than 50% from 2018 driven in large part by the growth in market values for equity securities. In the earnings release, BFIG discussed the success of their investment strategy, the success of their insurance operations and the success of Key West Restaurants Corp.

During the last 30 days, the S&P 500 and the fair value of BFIGs equity securities have dropped between 30%-40%, due to the impacts of COV-19. Additionally, Key West Restaurants Corp. has shut its doors at many locations and only offers take-out their other locations.

In their 10-K, BFIG discusses the success displayed in their 2019 results and has general wording regarding the risks associated with investing in equity securities in the Management Discussion & Analysis (MD&A) section.

Your manager, Peter Peterson, has requested that you research subsequent event disclosures.

Requirements:

1. Review subsequent events disclosure requirements
2. Review the SEC requirements for MD&A disclosure of risks.
3. Review the AICPA Consequences of COVID-19 Financial Reporting Considerations posted on Webcampus.
4. Prepare a memo with your recommendations for disclosure in the 10K. If your recommendation includes a subsequent event footnote and/or discussion in the MD&A, include potential wording. (Note: Address the memo to your manager from you)