We are pleased to release MaloneBailey's April 2021 issue of The Crunch, our newsletter highlighting recent accounting, regulatory and tax updates. Please note that the updates provided in this newsletter are not a comprehensive list.

We encourage you to visit the SECFASB and IRS websites for more information as well as a complete list of updated rules, regulations and proposals.  We invite you to contact us should you have any questions about the information provided in this issue.  Please visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.

The MaloneBailey Team
What's the Crunch?

Featured Podcast

  • Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring Nicole Zhao

Recent FASB & AICPA Updates


  • Joint Ventures – FASB Discusses Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors 
  • Responding to Legal Non-Compliance – AICPA’s Ethics Division Proposes Interpretations on Responding to Legal Non-Compliance 
  • Financial Reporting Model Improvements – GASB Fact Sheet Published 
  • GAQC – GAQC Alert No. 422 Published 
  • Compensated Balances – GASB Proposes Enhanced Guidance on Compensated Absences 
  • Covid-19 – GAQC Publishes Summary of Uniform Guidance (UG) Applicability for New COVID-19-Related Federal Programs
  • Covid-19 – GAQC Publishes Guidance on the Reporting of Certain COVID-19 Awards on an Accrual Basis SEFA 
  • GAQC – GAQC Alert No. 423 Published  

Recent SEC & PCAOB Updates

  • SEC CF Disclosure Guidance Topic: Topic No.7: Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b 2

Tax Updates

  • American Rescue Plan Act of 2021

Extra Crunch

  • OTC Markets 2020 Annual Market Review


About MaloneBailey, LLP

Featured Podcast
Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring Nicole Zhao


Summary - Harris Bricken is an international law firm with locations in Los Angeles, Portland, San Francisco, Seattle, Barcelona and Beijing. The firm's podcast, Global Law and Business, is hosted by international attorneys Fred Rocafort and Jonathan Bench.

Nicole Zhao, Senior Tax Manager at MaloneBailey, is featured in Episode 49. In this episode, Nicole discusses international tax and audit, tax issues for foreign companies looking to establish a presence in U.S., advice for businesses that struggled in 2021, expected tax code changes under the Biden Administration, why estate planning in 2021 will be important for high net worth people and much more. Episode 49 and all others are available on the Harris Bricken website. Please click here.

For more information about Harris Bricken, please click here.
Recent FASB & AICPA Updates
Joint Ventures – FASB Discusses Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 17, 2021 and continued its initial deliberations on the project. The FASB discussed disclosures, transition, and sweep issues. The FASB decided to:
  • Require that a joint venture formed after the effective date of the new guidance apply the measurement and recognition guidance upon formation prospectively. An existing joint venture entity would have an option to apply the new guidance retrospectively.
  • Require that a joint venture upon formation measure its net assets (including goodwill) using the fair value of the joint venture as a whole. Therefore, a joint venture would measure its total net assets upon formation as the fair value of 100 percent of the joint venture’s equity immediately after formation. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Responding to Legal Non-Compliance – AICPA’s Ethics Division Proposes Interpretations on Responding to Legal Non-Compliance

Summary - The Professional Ethics Executive Committee (PEEC) of the AICPA has issued the Exposure Draft, Responding to Non-Compliance with Laws and Regulations (Exposure Draft). The comment deadline is June 30, 2021.

As with the AICPA’s ASB proposal discussed above, the PEEC’s proposed amendments are designed to converge with the IESBA’s standards on the same topic, responding to non-compliance with laws and regulations.

As explained in the Exposure Draft, the proposed amendments re-propose two new interpretations, each entitled “Responding to Noncompliance With Laws and Regulations.” If adopted as final, the new interpretations will be in ET sections 1.170.010 and 2.170.010 of the AICPA Code of Professional Conduct (Ethics Code). The PEEC originally proposed these amendments in March 2017, but the amendments in the February 2021 Exposure Draft include substantive changes from the 2017 draft.

The Ethics Code currently does not include specific guidance for members encountering legal or regulatory noncompliance or suspected noncompliance. The proposed amendments provides for members’ responsibilities when encountering a NOCLAR (or suspected NOCLAR) at a client or within the employing organization. Both actual and suspected noncompliance with law or regulations are treated the same under the proposed standard, and the same term describes both.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Financial Reporting Model Improvements – GASB Fact Sheet Published

Summary - The GASB has published a Fact Sheet: Financial Reporting Model Improvements and Fact Sheet Executive Summary - Financial Reporting Model Improvements. This document discusses the GASB’s financial reporting model which is the blueprint for a government’s audited annual financial report. It is the part of generally accepted accounting principles that describes the layout and contents of the report—a government’s financial statements, notes to financial statements, and required supplementary information. 

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GAQC – GAQC Alert No. 422 Published

Summary - The AICPA’s Governmental Audit Quality Center (GAQC) has published Alert No. 422. Topics discussed in this alert include:

  • Registration information for the new GAQC Web event on February 17, 2021, covering the fundamentals of Government Auditing Standards;
  • Registration information for the GAQC Web event on March 11, 2021, on the new Uniform Guidance regulation that is effective and will have implications for both auditees and auditors;
  • Registration information for an event hosted by the AICPA Health Care Expert Panel on February 8, 2021, covering the latest financial accounting and reporting implications of the Provider Relief Fund (PRF);
  • The availability of a no-CPE archive of the most recent GAQC Web event that was comprised entirely of questions and answers surrounding single audit COVID-19 implications; and
  • A reminder about the required GAQC membership compliance questionnaire, which is due March 1, 2021, along with an early opportunity to register for the 2021 GAQC’s annual required Webcast. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Compensated Balances – GASB Proposes Enhanced Guidance on Compensated Absences

Summary - The Governmental Accounting Standards Board (GASB) has issued the Exposure Draft, Compensated Absences, to enhance the recognition and measurement guidance for compensated absences and refine related disclosure requirements. The comment deadline is June 4, 2021.

The proposed Statement would supersede the guidance issued by the GASB in Statement No. 16, Accounting for Compensated Absences, which GASB issued in 1992.
State and local governments often provide paid leave benefits to their employees, such as vacation leave and sick leave. Some benefits have evolved, such as with the use of a paid time off (PTO) model that may have characteristics of both vacation and sick leave. The Exposure Draft proposes to align recognition and measurement guidance for all types of compensated absences under a unified model.

The Exposure Draft details the circumstances under which governments would be required to recognize a liability for compensated absences and proposes guidance for measuring that liability. The general approach for measurement would be accumulated leave multiplied by an employee’s pay rate as of the financial reporting date.

The proposed model would result in governments recognizing a liability that more appropriately reflects when they incur an obligation for compensated absences. The GASB believes the model also would lead to greater consistency in application and improved comparability across governments.

The proposal would amend certain disclosures that are required at present. For example, the proposed Statement would provide an alternative to the existing requirement to disclose the gross increases and decreases in a compensated absences liability, such that governments would have an option to disclose only the net change in the liability. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Covid-19 – GAQC Publishes Summary of Uniform Guidance (UG) Applicability for New COVID-19-Related Federal Programs

Summary - The GAQC published a summary of information about federal programs that have been established as a result of COVID-19 pandemic. The Notes column of this publication includes any other pertinent information the GAQC is aware of regarding the program. GAQC is providing this summary to assist members with gathering initial information to help in the audit planning process and for purposes of discussions with clients. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Covid-19 – GAQC Publishes Guidance on the Reporting of Certain COVID-19 Awards on an Accrual Basis SEFA

Summary - The GAQC has published the Nonauthoritative Guidance on the Reporting of Certain COVID-19 Awards on an Accrual Basis SEFA. This document has been prepared to assist auditees and auditors as they consider the complexities involved with funding provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the timing of when that funding should be included on the Schedule of Expenditures of Federal Awards for single audit purposes. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
GAQC – GAQC Alert No. 423 Published

Summary - The AICPA’s Governmental Audit Quality Center (GAQC) has published Alert No. 423. Topics discussed in this alert include:

  • A newly issued practice aid, GAQC Nonauthoritative Guidance on the Reporting of Certain COVID-19 Awards on an Accrual Basis SEFA, that walks members through the nuances of determining when COVID-19 funding goes on an entity’s Schedule of Expenditures of Federal Awards (SEFA);
  • An update to the GAQC’s nonauthoritative summary of information about federal programs established as a result of the COVID-19 pandemic;
  • The latest information we have on the Provider Relief Fund (PRF) program;
  • A conclusion by the Department of Health and Human Services (HHS) about the applicability of single audit and other for-profit audit requirements to COVID-19 vaccines;
  • The latest information we have on certain other COVID-19 funding;
  • A recent technical revision by the Office of Management and Budget (OMB) to the Uniform Guidance and a reminder about the March 11th GAQC Web event on the Uniform Guidance; and
  • The status of the development of the 2021 OMB Compliance Supplement. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Recent SEC & PCAOB Updates
SEC CF Disclosure Guidance Topic: Topic No.7: Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b 2

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated its previously issued guidance in CF Disclosure Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2. This guidance addresses how and what to submit when filing an application objecting to public release of information otherwise required to be filed under the Securities Act and the Securities Exchange Act.

Corp Fin has updated this topic to provide guidance on options for when a confidential treatment order is about to expire. The guidance provides that companies that previously have obtained a confidential treatment order have three choices of what to do when the order is about to expire.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Tax Updates
American Rescue Plan Act of 2021
Written by Tabith Ford, Tax Senior, MaloneBailey, LLP
 

Summary – President Biden signed into law the American Rescue Plan Act of 2021, which provides $1.9 trillion to the American economy. The Act also includes unemployment relief, aid to the states, assistance to schools, tax provisions and a third round of stimulus checks.

Individuals
 
  1. Child Tax Credit - Not only will individuals receive a $1,400 stimulus check if certain income limitations are met, congress has also enhanced the child tax credit.
  2. Now 3,000 per child and fully refundable, whereas before it was $2,000 per child with only $1,400 as refundable.
  3. The excess amount of the credit over the present-law of $2,000 is phased out by $50 for every $1,000 of modified adjusted gross income in excess of the threshold amount ($150,000 for joint filers, $112,500 for head of household, and $75,000 for single filers)
  4. Unemployment Relief – Makes the first $10,200 of unemployment relief in 2020 exempt from tax for households with less than 150,000 of income.
  5. Exclusion of forgiven student loans – Previously, only certain conditions would allow student loan debt to be forgiven. Under the act, the exclusion will apply to any discharge of student loans for any reason during the period, for loans discharged after 2020 and before 2026.

Employers
  1. Paid Sick and Family Leave Credits –
  2. Applicable period extended from December 31, 2020 to September 30, 2021.
  3. Increased the limit on applicable wages for which family leave credit can be claimed from $10,000 to $12,000, effective after March 31, 2021.
  4. Employee Retention Credit
  5. Extended through the end of 2021.
  6. Small Business Administration grants – The act specifies that Targeted Economic Injury Disaster Loans (EIDL) and Restaurant Revitalization Grants received from the small business administration will not be subject to income tax, and the exclusion will not result in the denial of a deduction reduction of tax attributions, or denial of increase in basis. 

 
If you would like additional information, please click here or please feel free to contact our Senior Tax Manager, Nicole Zhao.
Extra Crunch
OTC Markets 2020 Annual Market Review

Summary - OTC Markets Group has released its 2020 annual review of developments on OTCQX and OTCQB as well as what changes are comings to its markets in 2021.

In his opening message, Jason Paltrowitz, EVP of Corporate Services, states "2020 changed the way companies connect, but markets remained resilient. Emerging sectors such as resources and mining, digital currencies and biotech saw tremendous demand—leveraging our OTCQX and OTCQB markets to provide the transparency, disclosure and visibility to capitalize on trends.

Our continued work with International IR societies and on initiatives with the ASX, TMX, Nasdaq North, Euronext, Deutsche Börse and the Canadian Securities Exchange underscore our collaboration with foreign exchanges and ongoing commitment to provide a more efficient path for global companies to access the U.S. capital markets."

To review the annual review, click here.

About MaloneBailey, LLP
Should you be interested in a complimentary estimate for audit, consulting and tax services, please contact Caroline Rosen at crosen@malonebailey.com or 713.343.4286.
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