We are pleased to release MaloneBailey's March 2020 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 SEC FASB   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

  • FASB Update on Earning Per Share

Recent FASB & AICPA Updates

  • FASB Accounting Standards Updates - No. 2020-02 —Financial Instruments —Credit Losses (Topic 326) and Leases (Topic 842) —Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) 
  • FASB Accounting Standards Updates - No. 2020-01 —Investments —Equity Securities (Topic 321), Investments —Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) —Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 
  • Exposure Draft - Proposed Accounting Standards Update 2020-100 —Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets 
  • Life and Health Insurance Entities – AICPA Publishes Working Draft of Life and Health Insurance Entities Issues 
  • IFRS for SMEs – IASB Issues Request for Information on Updating IFRS for SMEs 
  • Debt – IASB Amends IAS 1 on Classification of Debt as Current or Non-Current 
  • Joint Ventures – FASB Discusses Nonmonetary Asset Contributions to Joint Ventures 
  • SOP 20-1 – AICPA Issues New Statement of Position 
  • Auditing Standards Board – AICPA’s ASB Publishes Summary of January Meeting 
  • Financial Instruments – FASB Discusses Codification Improvements to Financial Instruments 
  • GASB Standards – GASB Publishes New Statement No. 92: Omnibus 2020 
  • Debt vs. Equity – FASB Discusses Debt vs. Equity 
  • GAO – GAO Publishes Professional Standards Update 
  • Materiality – AICPA Issues SSARS No. 25 to Align with GAAS and Converge with International Materiality Standards 

Recent SEC & PCAOB Updates

  • Regulation S-K – SEC Staff Updates Regulation S-K Interpretation 
  • Release No. 33-10749: Adoption of Updated EDGAR Filer Manual
  • Release No. 33-10751: Commission Guidance on Management’s Discussion and Analysis of Financial Condition and Results of Operations  
  • SEC Staff Speech, Running on Empty: A Proposal to Fill the Gap Between Regulation and Decentralization by Commissioner Hester M. Peirce 
  • SEC Staff Speech, Staff Legal Bulletin No. 21 
  • SEC Staff Speech, Myths and Realities: Modernizing the Proxy Rules by Commissioner Elad L. Roisman 
  • SEC Staff Speech, Learning from Miami’s Emprendimientos by Martha Miller, Advocate for Small Business Capital Formation 
  • SEC Staff Q&A: Frequently Asked Questions on Regulation Best Interest 

Tax Updates

  • Impact of 163(j) Business Interest Expense Limitations on Pass-Through Entities 

Extra Crunch

  • OTC Markets: What does it take to have a winning IR strategy?

About MaloneBailey, LLP

Featured Podcast
PODCAST: Earnings Per Share

Our featured p odcast highlights a FASB update on Earnings Per Share. Click on the image below to hear Leah Gonzales, one of our audit partners, discuss the accounting standards update (ASU), which simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings.  The Board decided to undertake this project to address narrow issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. 

For this podcast and many more, please visit the Resources section of the MaloneBailey website.
Recent FASB & AICPA Updates
FASB Accounting Standards Updates - No. 2020-02 —Financial Instruments —Credit Losses (Topic 326) and Leases (Topic 842) —Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842)

Summary - The FASB has issued Accounting Standards Update (ASU) No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842). This ASU adds an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 to the FASB Codification. This ASU also updates the SEC section of the Codification for the change in the effective date of Topic 842.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Accounting Standards Updates - No. 2020-01 —Investments —Equity Securities (Topic 321), Investments —Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) —Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

Summary - The FASB issued Accounting Standards Update (ASU) No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force). ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives. The ASU is based on a consensus of the FASB’s Emerging Issues Task Force (EITF).

In 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which added Topic 321, Investments—Equity Securities, and made targeted improvements to address certain aspects of accounting for financial instruments.

Among other changes, the ASU provided a company with the ability to measure certain equity securities without a readily determinable fair value at cost, minus impairment, if any, unless an observable transaction for an identical or similar security occurs (the measurement alternative). Stakeholders asked the FASB to clarify how this guidance should interact with equity method investments.

The new ASU clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The changes in ASU No. 2016-01 also prompted stakeholders to ask whether certain forward contracts and purchased options should be accounted for in accordance with Topic 321, Topic 323, or Topic 815, Derivatives and Hedging.

The new ASU clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option.

The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Exposure Draft - Proposed Accounting Standards Update 2020-100 —Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets 

Summary - The FASB has issued a proposed ASU, Not-for-Profit Entities (Topic 958)— Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets . The proposal includes amendments intended to improve transparency around how not-for-profit organizations present and disclose contributed nonfinancial assets, also known as gifts-in-kind. The comment deadline is April 10, 2020.

Examples of contributed nonfinancial assets include fixed assets such as land, buildings, and equipment; the use of fixed assets or utilities; materials and supplies, such as food, clothing, or pharmaceuticals; intangible assets; and/or recognized contributed services.

The proposed ASU, if adopted as proposed, would require a not-for-profit organization to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.

The proposed amendments also would require a not-for-profit to disclose:
  • Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed nonfinancial assets, and
  • For each category of contributed nonfinancial assets received (as identified above):
  • Qualitative information about whether the contributed nonfinancial assets were or are intended to be either monetized or utilized during the reporting period and future periods. If utilized, a description of the programs or other activities in which those assets were or are intended to be used.
  • A description of any donor restrictions associated with the contributed nonfinancial assets.
  • The valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or most advantageous market) if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.

For more information, click  here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Life and Health Insurance Entities – AICPA Publishes Working Draft of Life and Health Insurance Entities Issues 

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has issued four working drafts of accounting issues for insurance entities. These working drafts provide guidance on implementation of FASB Accounting Standards Update (ASU) No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts .The comment due date for each working draft is April 10, 2020.

When final, the text of the working drafts will be included in the Audit and Accounting Guide: Life and Health Insurance Entities .

The new working drafts for implementation of ASU 2018-12 include:
  • Issue #1: Claim liabilities associated with long-duration traditional insurance contracts;
  • Issue #4AB: Market Risk Benefits - Considerations related to transition, including the use of hindsight and clarification on the application of the fair value framework of FASB ASC 820 to the initial and subsequent measurement of market risk benefits at fair value;
  • Issue #8: Updating cash flow assumptions in the net premium ratio; and
  • Issue #9ABC: DAC [Deferred Acquisition Costs] Amortization, including (a) considerations for evaluating whether the amortization on a constant-level basis for grouped contracts approximates straight-line amortization on an individual basis, (b) interaction of the liability for future policy benefits cash flow assumption updates and DAC amortization assumption updates, and (c) updating of DAC experience as of the beginning of the period or end of the period. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
IFRS for SMEs – IASB Issues Request for Information on Updating IFRS for SMEs

Summary - The International Accounting Standards Board (IASB) has issued the Request for Information: Comprehensive Review of the IFRS for SMEs Standard , soliciting views on the IASB”s approach to updating the IFRS for SMEs ® Standard. The comment due date is July 27, 2020.

IFRS for SMEs is the IASB’s simplified accounting standard for small and medium-sized entities. The IFRS for SMEs Standard is required or permitted in more than 80 countries and is used by millions of companies.

The objective of the consultation is to seek views on whether and how to align IFRS for SMEs with full International Financial Reporting Standards (IFRS), developed for publicly accountable entities and currently required in more than 140 jurisdictions.

The Request for Information asks for views on different approaches to updating IFRS for SMEs , as well as views on how it could be aligned with newer IFRS, such as IFRS 9, Financial Instruments; IFRS 15, Revenue from Contracts with Customers; and IFRS 16, Leases .

According to Hans Hoogervorst, Chair of the IASB, ”[t]his review is about determining to what extent the IFRS for SMEs Standard should be updated for developments in IFRS Standards and ensuring it remains a high-quality Standard for the millions of companies that have begun using it since it was first issued 10 years ago.”

The IASB has also issued a Snapshot: Comprehensive Review of the IFRS for SMEs Standard , which provides a summary of the consultation and the Request for Information.

The IASB will use the responses to the Request for Information to help the SMEIG develop recommendations for the IASB on whether and how to amend the IFRS for SMEs Standard. Any proposed changes will be subject to further consultation. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Debt – IASB Amends IAS 1 on Classification of Debt as Current or Non-Current

Summary - The International Accounting Standards Board (IASB) issued narrow-scope amendments to International Accounting Standards (IAS 1), Presentation of Financial Statements , to clarify how to classify debt and other liabilities as current or non-current.

The objective of the amendments, Classification of Liabilities as Current or Non-current (Amendments to IAS 1) , is promote consistency in applying the IAS 1 requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (that is, due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity.

The amendments clarify, not change, existing requirements. They are not expected to affect companies’ financial statements significantly. However, these amendments could result in companies reclassifying some liabilities from current to non-current, and vice versa; this could affect a company’s loan covenants. Thus, to give companies time to prepare for the amendments, the IASB decided to provide two years to comply.

The amendments are effective for annual periods beginning on or after January 1, 2022. They should be applied retrospectively. Early application is permitted.  

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Joint Ventures – FASB Discusses Nonmonetary Asset Contributions to Joint Ventures

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 22, 2020, and began its initial deliberations on its accounting by a joint venture for nonmonetary assets contributed by investors project. The FASB directed the staff to continue research on various alternatives for recognizing and measuring nonmonetary assets contributed to a joint venture in a joint venture’s financial statements. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SOP 20-1 – AICPA Issues New Statement of Position

Summary - The AICPA’s Auditing Standards Board (ASB) has issued Statement of Position (SOP) 20-1, Reporting Pursuant to the 2020 Global Investment Performance Standards (AUD sec. 46).

CFA Institute developed the Global Investment Performance Standards (GIPS) standards. The GIPS standards are used to promote fair representation, full disclosure, and greater comparability of investment performance. Compliance with the standards is voluntary. A claim of compliance by investment management firms and asset owners may give current and potential clients, beneficiaries, and oversight boards more confidence in the integrity of the performance presentations and the general practices of a compliant firm or asset owner.

SOP 20-1 includes interpretive guidance for engagements to examine and report on aspects of a firm’s claim of compliance with the 2020 edition of the GIPS. SOP 20-1 provides interpretive guidance as recommended by the AICPA Investment Performance Standards Task Force on applying the Statements of Standards for Attestation Engagements (SSAE) to report in accordance with the GIPS.

SOP 20-1 also provides guidance on engagements to examine and report on any of the firm’s composites or pooled funds and their associated GIPS reports. This is a performance examination.

SOP 20-1 includes an overview of the GIPS standards as well as the detailed standards. It also includes a number of exhibits and illustrative reports for use by practitioners, including:
  • Sample engagement letter: verification and performance examination;
  • Example representation letter;
  • Illustrative attest report: verification; and
  • Illustrative attest reports: verification and performance examination, including example verification and performance examination report, illustrative GIFS composite report, performance examination report with reference to separate verification report, verification and performance examination report on an asset owner total fund, and reporting directly on a subject matter. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Auditing Standards Board – AICPA’s ASB Publishes Summary of January Meeting
Summary - The AICPA’s Auditing Standards Board (ASB) met on January 13 through 16, 2020, in San Diego, California. The ASB has issued a High Level Summary of the meeting that includes an audit and attest standards update.

Matters discussed and decisions taken at the meeting include:
  • Voted to ballot for issuance the final Statement on Auditing Standards (SAS), Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes from SAS No. 134, to be effective for audits of financial statements for periods ending on or after December 15, 2020, aligning it with SAS 134;
  • Deliberations on enhancements of the requirements on the auditor’s responsibility to communicate actual or suspected occurrences of an entity’s noncompliance with laws or regulations (NOCLAR) or fraud to successor auditors;
  • The proposed SAS, Audit Evidence, planned to be finalized at the ASB’s May meeting;
  • The project to permit direct examination and review attestation engagements; and
  • Other ongoing projects.  

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Financial Instruments – FASB Discusses Codification Improvements to Financial Instruments

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 29, 2020, and discussed a summary of comments on seven financial instrument amendments and decided to finalize these amendments separately from the November 2019 proposed Accounting Standards Update (ASU), Codification Improvements.
The FASB affirmed its decision on a number of items, including the following:
  • Fair value option disclosures;\
  • Applicability of portfolio exception in Topic 820, Fair Value Measurement, to nonfinancial items;
  • Disclosures for depository and lending institutions;
  • Cross-reference to line-of-credit or revolving debt arrangements guidance in Subtopic 470-50, Debt—Modifications and Extinguishments; and
  • Cross-reference to net asset value practical expedient in Subtopic 820-10, Fair Value Measurement—Overall

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
GASB Standards – GASB Publishes New Statement No. 92: Omnibus 2020

Summary - The Governmental Accounting Standards Board (GASB) has issued new Statement No. 92, Omnibus 2020 . Statement 92 includes guidance addressing various accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements.

Omnibus 2020
The issues covered by GASB Statement No. 92, Omnibus 2020 , include:
  • Modification of the effective date of Statement No. 87, Leases, as well as associated implementation guidance, to fiscal years beginning after December 15, 2019, to address concerns regarding interim financial reports;
  • Reporting intra-entity transfers of assets between a primary government employer and a component unit defined benefit pension plan or defined benefit other postemployment benefit (OPEB) plan;
  • The applicability of Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for pensions and OPEB;
  • The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to pension and OPEB arrangements; and
  • Measurement of liabilities and assets, if any, related to asset retirement obligations in a government acquisition.

Effective Dates:
The effective dates of the amendments made by Statement 92 vary, as follows:
  • The requirements of Statement 92 that relate to the effective date of Statement 87 and its associated implementation guidance are effective upon issuance.
  • The provisions related to the application of Statement 84 are effective for periods beginning after June 15, 2020.
  • The amendments related to intra-entity transfers of assets and applicability of Statements 73 and 74 are effective for fiscal years beginning after June 15, 2020.
  • The remaining requirements related to asset retirement obligations are effective for government acquisitions occurring in reporting periods beginning after June 15, 2020.

Earlier application is encouraged and is permitted by topic.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Debt vs. Equity – FASB Discusses Debt vs. Equity

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 5, 2020, and continued redeliberating the amendments in proposed ASU, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The FASB reached a number of decisions, including:

  • Clarify the scope of the guidance in Subtopic 470-20 for convertible debt instruments and in Subtopic 505-10, Equity—Overall, for convertible preferred stock.
  • Clarify the difference between a convertible debt and a debt instrument that could be converted to a variable number of shares with an aggregate fair value equal to a fixed monetary amount (such as share-settled debt).
  • Require that an entity apply the if-converted method of calculating diluted EPS to all convertible instruments and that interest expense not be added back to the numerator for convertible debt instruments if the principal is required to be settled in cash.
  • Exclude certain share-based payment arrangements (instruments that are liability-classified in accordance with guidance in paragraph 718-10-25-15) from the scope of the EPS amendments on instruments that may be settled in cash or shares.
  • Clarify that the reassessment guidance in paragraph 815-40-35-8 applies to both freestanding instruments and embedded features (similar to the scope as written in paragraph 815-40-15-5).
  • Add a cross-reference in Section 815-40-35 to the guidance in Subtopic 815-15, Derivatives and Hedging—Embedded Derivatives, on the accounting for embedded features upon a change in assessment of the derivatives scope exception. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
GAO – GAO Publishes Professional Standards Update

Summary - The GAO has published Professional Standard Update (PSU) No. 76 which discusses changes in professional standards. The purpose of these updates is to “highlight the issuance and some key points of recent standards. PSUs do not contain a complete summary of the standards. Those affected by a new standard should refer to that standard for details. This PSU highlights the effective dates of selected standards reported previously that are expected to affect auditors at the time of or shortly after issuance of the most recent update.” 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Materiality – AICPA Issues SSARS No. 25 to Align with GAAS and Converge with International Materiality Standards

Summary - The American Institute of CPAs (AICPA) Accounting and Review Services Committee (ARSC) has issued Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions .

Convergence with International Review Standards
As noted in an AICPA news release relating to SSARS No. 25, the AICPA issued SSARS No. 25 to converge AR-C section 90, Review of Financial Statements , with International Standard for Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. The ARSC believes that the SSARS requirements should be as closely converged with ISRE 2400 (Revised) as possible to facilitate an accountant’s ability to perform and report on engagements in accordance with both sets of standards. Such convergence should reduce any confusion regarding the level of assurance obtained in accordance with either set of standards.

Further, SSARS 25 also aligns more closely with other principles of generally accepted auditing standards (GAAS). While, as noted in the AICPA’s news release, there are significant differences between an audit engagement and an engagement performed in accordance with SSARSs, other concepts, such as materiality, are consistent regardless of the level of services performed on the financial statements.

SSARS No. 25 amends SSARS No. 21, Statements on Standards for Accounting and Review Services: Clarification and Recodification , specifically:
  • AR-C section 60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services;
  • AR-C section 70, Preparation of Financial Statements;
  • AR-C section 80, Compilation Engagements; and
  • AR-C section 90, Review of Financial Statements.

The AICPA has also issued an At-A-Glance, Revisions to Review Standard for Consistency with Other Professional Standards , to accompany SSARS 25. The At-a-Glance provides a summary and background discussion on SSARS 25 and the materiality standards.

Effective Date:
The amendments made by SSARS 25 are effective for engagements performed in accordance with SSARSs on financial statements for periods ending on or after December 15, 2021, with early implementation permitted. 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Recent SEC & PCAOB Updates
Regulation S-K – SEC Staff Updates Regulation S-K Interpretation

Summary - The staff in the Division of Corporation Finance (Corp Fin) has updated its Compliance and Disclosure Interpretation (C&DI), Regulation S-K. This C&DI provides Corp Fin’s interpretations of various sections of Regulation S-K. Corp Fin has added new Questions 110.02, 110.03, and 110.04. These questions include guidance on preparing Item 303, Management's Discussion and Analysis of Financial Condition and Results of Operations

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Release No. 33-10749: Adoption of Updated EDGAR Filer Manual

Summary - The SEC has adopted an updated EDGAR Filer Manual . This updated edition includes changes to incorporate the SEC’s adoption of amendments to regulatory requirements in Regulation ATS under the Exchange Act applicable to alternative trading systems that trade National Market System stocks. In addition, this edition provides additional support for XBRL validation of Document Entity Identifier data in XBRL submissions to improve consistency with existing EDGAR data and data in EDGAR header elements.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Release No. 33-10751: Commission Guidance on Management’s Discussion and Analysis of Financial Condition and Results of Operations

Summary - In conjunction with its proposal on amendments to modernize and enhance MD&A, the SEC announced that it is providing guidance on key performance indicators and metrics in MD&A. The guidance provides that, where companies disclose metrics, they should consider whether additional disclosures are necessary and gives examples of such disclosures. The guidance also reminds companies of the requirements in Exchange Act Rules 13a-15 and 15d-15 to maintain disclosure controls and procedures and that companies should consider these requirements when disclosing metrics.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Speech, Running on Empty: A Proposal to Fill the Gap Between Regulation and Decentralization by Commissioner Hester M. Peirce

Summary - SEC Commissioner Hester Peirce recently discussed a possible centralized regulatory framework for oversight of tokens. Peirce indicated that many “crypto entrepreneurs are seeking to build decentralized networks in which a token serves as a means of exchange on, or provides access to a function of the network. In the course of building out the network, they need to get the tokens into the hands of other people. But these efforts can be stymied by concerns that such efforts may fall within the ambit of federal securities laws. The fear of running afoul of the securities 

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Speech, Staff Legal Bulletin No. 21

Summary - The staff in the SEC’s Office of Municipal Securities has issued Staff Legal Bulletin No. 21, Application of Antifraud Provisions to Public Statements of Issuers and Obligated Persons of Municipal Securities in the Secondary Market . This bulletin provides the views of the staff regarding the application of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5[2] to public statements made by issuers of municipal securities and obligated persons in the secondary market. The antifraud provisions apply to any statement of a municipal issuer that is reasonably expected to reach investors and the trading markets.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Speech, Myths and Realities: Modernizing the Proxy Rules by Commissioner Elad L. Roisman

Summary - SEC Commissioner Elad L. Roisman recently discussed common myths associated with the SEC’s efforts to modernize its proxy rules. Regarding the SEC’s proxy rules, Roisman indicated that “the SEC’s proposals to modernize these rules were not only necessary, but long overdue. Yet the reaction from the loudest voices came swiftly and furiously. Even before the Commission voted on these proposals, the agency was accused of serving as a shill for corporate interests, suppressing shareholder votes, and sheltering CEOs of big corporations from accountability.” Roisman urged interested parties to provide feedback to the SEC on its proxy rule proposals.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Speech, Learning from Miami’s Emprendimientos by Martha Miller, Advocate for Small Business Capital Formation

Summary - SEC Advocate for Small Business Capital Formation Martha Miller recently discussed efforts by the office to enhance capital raising. Miller indicated that her office wants “to create new resources to empower entrepreneurs to raise the capital you need.”

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Q&A: Frequently Asked Questions on Regulation Best Interest

Summary - The staff in the SEC’s Division of Trading and Markets has published Frequently Asked Questions on Regulation Best Interest . This document provides responses to questions about Regulation Best Interest and is expected to be updated from time to time with the SEC’s responses to additional questions. These responses represent the views of the staff of the Division of Trading and Markets. Topics covered in the FAQ document include:
  • Recommendation;
  • Disclosure obligation;
  • Care obligation; and
  • Conflict of interest obligation.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Release No. BHCA-8: Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds

Summary - The SEC and four other agencies have proposed for public comment amendments to regulations implementing Section 13 of the Bank Holding Company Act (BHC Act). Section 13 contains certain restrictions on the ability of a banking entity or nonbank financial company supervised by the Board to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.

The proposed amendments are intended to continue the agencies’ efforts to improve and streamline the regulations implementing section 13 of the BHC Act by modifying and clarifying requirements related to the covered fund provisions.

Comments on the proposal are due on or before April 1, 2020.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Release No. 33-10750: Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information

Summary - The SEC proposed for public comment amendments to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. If adopted as proposed, the amendments would eliminate duplicative disclosures and modernize and enhance Management's Discussion and Analysis (MD&A) disclosures for the benefit of investors, while simplifying compliance efforts for companies.

Proposed Amendments
The proposed amendments would eliminate Item 301 (selected financial data) and Item 302 (supplementary financial data). In addition, the proposal would amend Item 303 (MD&A). According to the SEC, the proposed amendments “are intended to modernize, simplify, and enhance the financial disclosure requirements by reducing duplicative disclosure and focusing on material information in order to improve these disclosures for investors and simplify compliance efforts for registrants.”

Among other things, the proposed amendments to MD&A would:

  • Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Replace Item 303(a)(4), Off-balance sheet arrangements, with a principles-based instruction to prompt registrants to discuss off-balance sheet arrangements in the broader context of MD&A;
  • Eliminate Item 303(a)(5), Tabular disclosure of contractual obligations given the overlap with information required in the financial statements and to promote the principles-based nature of MD&A;
  • Add a new disclosure requirement to Item 303, Critical accounting estimates, to clarify and codify existing Commission guidance in this area; and
  • Revise the interim MD&A requirement in Item 303(b) to provide flexibility by allowing companies to compare their most recently completed quarter to either the corresponding quarter of the prior year (as is currently required) or to the immediately preceding quarter.

The proposal will have a 60 day comment period.

For more information, click here .

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Tax Updates
Impact of 163(j) Business Interest Expense Limitations on Pass-Through Entities

Summary –  The Tax Cuts and Jobs Act (“TCJA”)  enacted in December of 2017, included IRC Section 163(j) which limits the amount of business interest a taxpayer can deduct in the current taxable year. Business interest expense is generally limited to the sum of business interest income, floor plan financing interest expense and 30% of Adjusted Taxable Income (ATI). Taxpayers not qualified to be excluded from the limitation must file Form 8990 along with their federal income tax return.
 
Some taxpayers may qualify to be excluded from this limitation:
  • Certain small businesses – Businesses not considered a tax shelter or syndicate (defined below) with average gross receipts over the three prior tax years not exceeding $25 million.
  • Taxpayers in the trade or business of providing services as an employee or regulated public utility
  • Real property or farm trades or businesses that elect out of the limitation pursuant to IRC section 163(j). However, certain requirements must be met to make this election and an analysis should be prepared to determine if the election will generate the most beneficial results.
 
Your partnership or LLC may be considered as a tax shelter or syndicate if more than 35% of the losses of the entity during the tax year are allocable to limited partners. This broad definition has caused many small businesses to be subject to complex filing requirements. In 2019, the AICPA has requested from the IRS a relief for small businesses to avoid treatment as a tax shelter, if certain conditions are met. However, the IRS has not responded to such request yet. 
 
To determine if you will be affected by the 163(j) limitations, please feel free to contact our Senior Tax Manager, Nicole Zhao .  
 
Click here for more information.
Extra Crunch
OTC Markets White Paper: What Does It Take to Have A Winning IR Strategy?

Summary - OTC Markets Group has released its newest white paper, which offers case studies for best practice tips from the winners and nominees of IR Magazine Awards - Small Cap. The white paper includes insights from portfolio managers about what they're looking for from an IR strategy in companies they invest.


According to the OTC Markets website, "the success of the nominees and winners reflects on a range of IR best practices, including:
  • A successful rebranding campaign by Safehold
  • Industry-leading investor targeting by RMS Medical Products
  • Enhanced investor communication by NAPCO Security Technologies"

For more information and to access the white paper, 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.
Our Partners
www.malonebailey.com