We are pleased to release MaloneBailey's August 2018 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.  We invite you to 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
Accounting and Regulatory Updates
       Featured Podcast
Our featured podcast for August 2018 focuses on myths and rumors those preparing to take their CPA exams might hear. Qing Gong, Audit Senior, helps us break down some of those rumors and find out if there is any truth to them. Click on the image below to listen to our featured podcast. Podcast1

             Recent FASB Updates & Proposals
Improvements to Nonemployee Share-Based Payment Accounting - FASB ASU No. 2018-07  FASB01

Summary - FASB ASU No. 2018-07 is intended to reduce cost and complexity as well as improve financial reporting for nonemployee share-based payments. This ASU also supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees.

The amendments to this ASU are effective for  public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company's adoption date of Topic 606, Revenue from Contracts with Customers.

For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB and IASB Boards Hold Joint Educational Series  FASB02

Summary The FASB and IASB held a joint educational meeting on June 19, 2018 to discuss a number of topics, including:
  • Segment reporting;
  • Financial performance reporting/primary financial statements;
  • Disclosure framework/disclosure initiative;
  • Fair value measurement disclosures/fair value post-implementation review;
  • Goodwill and impairment; and
  • Implementation of the revenue (Topic 606, IFRS 15) and leases (Topic 842, IFRS 16) standards.
For complete EITF meeting Notes, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Discusses Targeted Improvements to Consolidation Guidance  FASB03

Summary - The FASB recently met on June 27, 2018, and discussed comment letter feedback received on its proposed ASU, Consolidation (Topic 812): Reorganization. The FASB decided to continue its existing project to reorganize Topic 810, Consolidation. They also instructed their staff to develop nonauthoritative educational material to address the more difficult parts of consolidation guidance with the goal of supporting and supplementing the reorganized authoritative consolidation guidance.
The FASB also ratified the consensus reached at the June 7, 2018 EITF meeting on Issue No. 17-A, "Customer's Accounting for Implementation, Setup, and Other Upfront Costs (Implementation Costs) Incurred in a Cloud Computing Arrangement That Is Considered a Service Contract."

For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

             Recent SEC Updates & Proposals
SEC Staff Speeches - Observations on Culture at Financial Institutions and the SEC by Chairman Jay Clayton SEC101

Summary SEC Chairman Jay Clayton recently spoke about the importance of developing, improving and reinforcing positive culture in our financial institutions. Topics discussed by Clayton included:
  • Culture is not an option;
  • Culture is a collection of countless internal and external actions;
  • Preserving and enhancing culture through a clear and consistent mission;
  • Culture beyond laws and regulations; and
  • SEC expects commitment and action.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Speech - Remarks Before the Institute of Management Accountant's 2018 Annual Conference and Expo - "Advancing Purpose and Promise of Those Involved in Financial Reporting," by Wesley Bricker, Chief Accountant SEC102

Summary SEC Chief Accountant Wesley Bricker recently spoke about the important role management accountants play within our financial reporting process and the relationship among management, the audit committee, and the auditor. Topics discussed by Bricker included:
  • Business and markets;
  • Financial reporting information in our markets;
  • Those involved in financial reporting;
  • Management's crucial responsibilities;
  • Responsibility of auditors and audit committees; and
  • Innovations and emerging issues in technology and commerce.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary William Hinman, Director of the SEC's Division of Corporation Finance (Corp Fin) recently discussed the application of Federal securities laws to digital asset transactions. Hinman indicated that promoters "in order to raise money to develop networks on which digital assets will operate, often sell the tokens or coins rather than sell shares, issue notes or obtain bank financing. But, in many cases, the economic substance is the same as a conventional securities offering." Federal securities laws would apply to these types of transactions given that funds are raised with the expectation that the promoters will build their system and investors can earn a return on the instrument.
Hinman's indicated factors to consider in assessing whether a digital asset is offered as an investment contract and is thus a security. Primarily, consider whether a third party, be it a person, entity or coordinated group of actors, drives the expectation of a return. That question will always depend on the particular facts and circumstances and this list is illustrative, not exhaustive.

For more information, click  here .

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary The SEC's Division of Corporation Finance (Corp Fin) announced that it will begin making serious deficiencies letters publicly available through EDGAR shortly after they are issued by Corp Fin. Corp Fin selectively reviews certain registration statements or offering documents to monitor and enhance compliance with the applicable disclosure and accounting requirements. Corp Fin generally makes the review correspondence publicly available through EDGAR no sooner than 20 business days after we complete a filing review. 

Corp Fin indicated that consistent with its "ongoing efforts to enhance the transparency of our review process, we intend to make these letters publicly available through EDGAR shortly after we issue them. This will make it clear that the Division believes the filing under consideration is not minimally compliant with statutory or regulatory requirements."
These letters will appear in companies' filing histories as "SEC STAFF LETTER: SERIOUS DEFICIENCIES." Corp Fin indicated that it will begin by publishing letters issued on June 15, 2018 and later. The letters will be disseminated via EDGAR within 10 calendar days of issuance.

For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary The SEC proposed amendments to the rules governing its whistleblower program. The whistleblower program was established in 2010 to incentivize individuals to report high-quality tips to the SEC and help the agency detect wrongdoing and better protect investors and the marketplace.  
After nearly seven years of experience administering the whistleblower
 program, the SEC has identifiedvarious ways in which the program might benefit from additional rulemaking. The proposed rules would, among other things, provide the SEC with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the whistleblower claims review process, and clarify the requirements for anti-retaliation protection under the whistleblower statute.

For highlights, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

        Tax Updates
Article by Nicole Zhao

Recently, the Supreme Court refused to review a Ninth Circuit's decision on an FBAR violation from 2006, which resulted in a $1.2 million penalty on the taxpayer. U.S. v. Bussell, 120 AFTR 2d 2017-6379
Each U.S. person (business or individual) who has a financial interest in or signature authority over any foreign financial accounts with aggregate value over $10,000 at any time during the calendar year must file FBAR.
A non-willful violation penalty is $10,000, while a willful violation penalty can be up to the greater of  $100,000  or 50% of the balance in the foreign bank account at the time of the violation. In addition, a willful criminal FBAR violation can lead to the maximum penalty of 5 year sentence and a $250,000 fine. Each unreported bank account is counted as one violation and thus the total penalty can be times of the above amounts.
While the taxpayer in the above case admitted that she willfully failed to disclose her foreign bank accounts, she argued that the $1,221,806 penalty imposed by the IRS violates the Excessive Fines Clause of the Constitution. She also asserted that the IRS illegitimately obtained her Swiss account information from the Swiss government, as the U.S. and Switzerland Treaty only allows receipt of information from the Swiss government pertaining to tax violations. The district court reduced the penalty to $1,120,513, which represented the maximum amount  permitted under the applicable civil laws. But the district court concluded that this case was clearly a tax collection case. The Ninth Circuit affirmed the district court's decision. And on April 30, 2018, the Supreme Court refused to review the Ninth Circuit's decision.
Recent FBAR Development:
Since 2012, in order to encourage compliance, the IRS has introduced some programs and procedures to reduce the heavy penalty from FBAR violations. These include the Offshore Voluntary Disclosure Program, Streamlined Filing Compliance Procedures and Delinquent International Information Return Submission Procedures. Specifically, the Delinquent FBAR Submission Procedures may help taxpayers avoid the FBAR penalties under certain circumstances.
Take Away: Taxpayers (individual and business) should evaluate their FBAR filing obligation and take actions while the IRS compliance incentives are still available.
For answers to your FBAR disclosure questions, please contact Nicole Zhao.

        Extra Crunch
OTC Markets Mid-Year Review EX02
Curious to see what has happened on the OTCQX and OTCQB Markets so far in 2018? Check out OTC's progress towards national Blue Sky status, new initiatives for 2018, events and more. Click here or the picture below to view the OTC Mid-Year Review.

Source: OTC Markets

Small - Cap Company Guide - Best Practices for Being Public and Raising CapitalEX01

OTC Markets has recently published a comprehensive guide with IR Magazine for small-
cap  companies  looking to raise capital and grow their businesses. The  guide includes tips and checklists for IPO alternatives, capital raising, targeting the right investor and much more.
Click here for more information and to download the guide.

Source: IR Magazine

MaloneBailey Receives Numerous Distinctions and Designations EX03

MaloneBailey is excited to announce that we have recently been recognized as a 2018 INSIDE Public Accounting (IPA) Best of the Best Firms, Best of the Best Fastest-Growing Firms and a Top 300 firm!  IPA's annual Best of the Best recognition honors CPA firms across the country for their superior financial and operational performance based on more than 70 criteria. The selections were based on responses from more than 550 firms that participated in this year's IPA Survey and Analysis of Firms. 

The firm is also proud to announce that we have been designated as a Texas Mother-Friendly  Worksite by the Texas Department of State Health Services! This designation is part of an effort to support breastfeeding mothers as they return to work. MaloneBailey understands that juggling work while caring for an infant can be tough, and we are pleased to do our part to support working mothers everywhere. For more information on this designation, please visit  www.texasmotherfriendly.org .

        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.