We are pleased to release MaloneBailey's May 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

  • Reimagining the Workplace: A Discussion on the Hybrid Approach

Recent FASB & AICPA Updates


  • FASB Accounting Standards Updates - Accounting Standards Update No. 2021-03 —Intangibles —Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events  
  • FASB Accounting Standards Updates - Accounting Standards Update No. 2021-02 —Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient
  • FASB Accounting Standards Updates - Accounting Standards Update No. 2021-01 —Reference Rate Reform (Topic 848): Scope  
  • Segment Reporting – FASB Discusses Segment Reporting 
  • Revenue Recognition –FASB Ratifies EITF Consensus 
  • IFRS – IASB Proposes New Approach to Developing Disclosure Requirements in IFRS 
  • PPP Loans –AICPA’s Center for Plain English Accounting Publishes Guide on PPP Loans 
  • Fair Value Hedging –FASB Discusses Comments Received on Proposal 

Recent SEC & PCAOB Updates

  • SEC Staff Views: Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies 
  • SEC Staff Views: Staff Guidance on EDGAR Filing of Form C 
  • SEC Staff Speech, Public Input Welcomed on Climate Change Disclosures, Allison Herren Lee, Chairman - March, 2021 


Tax Updates

  • Treasury and IRS Provide Guidance on Tax Relief for Deductions for Food or Beverages from Restaurants

Extra Crunch

  • PCAOB Inspections –PCAOB Releases Spotlight on 2021 Staff Outlook for Inspections and Audit Committee Resource 


About MaloneBailey, LLP

Featured Podcast
Reimagining the Workplace: A Discussion on the Hybrid Approach


Summary - Post pandemic life in the office is shaping up to look and feel different for many organizations worldwide. After having worked from home for more than a year, many organizations have announced their decision to implement a hybrid approach moving forward, that is combining workdays at the office and at home. Rethinking where and how we work is a hot topic today and one that many organizations are grappling with.

Shelby Stevens from the HR Department at MaloneBailey and Caroline Rosen from the Marketing Department at MaloneBailey discuss the blended approach, its benefits and challenges, considerations for putting a long term plan in place, how to address the 'culture' concern, employee burnout and mental wellness and the policies, tools, and training offerings to consider when weighing this approach.

Simply click on the image below to listen to the podcast. For this podcast and many more, please visit the Resources section of our website.
Recent FASB & AICPA Updates
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-03 —Intangibles —Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events

Summary - The FASB has issued an Accounting Standards Update (ASU) that provides an accounting alternative expected to reduce the complexity for private companies and not-for-profit organizations when performing the goodwill triggering event evaluation.

Under current GAAP, goodwill must be tested for impairment when a triggering event occurs that indicates that it is more likely than not that the fair value of the reporting unit is below its carrying value. Companies and organizations are required to monitor for and evaluate goodwill triggering events when they occur throughout the year.

Some stakeholders raised questions about the value of evaluating a triggering event at an interim date when certain private companies and not-for-profit organizations only issue GAAP-compliant financial statements on an annual basis. They noted the cost and complexity of preparing interim balance sheets and projecting cash flows that, according to those stakeholders, may not be relevant at the annual reporting date when financial statements are issued.

To address this, FASB Accounting Standards Update (ASU) No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, provides an accounting alternative that allows private companies and not-for-profit organizations to perform a goodwill triggering event assessment, and any resulting test for goodwill impairment, as of the end of the reporting period, whether the reporting period is an interim or annual period. It eliminates the requirement for companies and organizations that elect this alternative to perform this assessment during the reporting period, limiting it to the reporting date only.

The scope of the alternative is limited to goodwill that is tested for impairment in accordance with Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill. The amendments in the ASU are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this Update for interim financial statements already issued in the year of adoption.

The amendments in the ASU also include an unconditional one-time option for entities to adopt the alternative prospectively after its effective date. No additional disclosures would be required.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-02 —Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient

Summary - The FASB has published ASU 2021-02, Revenue Recognition: Optional Rules for Franchisors. ASU 2021-02 provides industry-specific optional accounting guidance for revenue recognition that is limited to nonpublic franchisors. Analogies to this guidance are not permitted.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-01 —Reference Rate Reform (Topic 848): Scope

Summary - The FASB has published ASU 2021-01, Reference Rate Reform. ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that re affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Segment Reporting – FASB Discusses Segment Reporting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 10, 2021 and continued its deliberations of a principle-based disclosure requirement to report the significant segment expenses that are both: (1) regularly provided to the chief operating decision maker (CODM); and (2) included in the reported measure of segment profit or loss. Among other things, the FASB decided:
  • That each significant expense category disclosed under the principle should be reconciled to its corresponding consolidated amount.
  • To retain the current expense disclosures in Topic 280 and that a public entity would be additionally required to comply with the principle.
  • A public entity would be required to disclose the following information by reportable segment irrespective of whether the CODM is regularly provided with this information: (a) an amount for other items that is the difference between segment revenue less the significant expenses disclosed under the principle and the segment profit or loss measure; and (b) a description of the composition of other items. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Revenue Recognition – FASB Ratifies EITF Consensus

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on March 24, 2021, and ratified EITF Issue No. 19-B, “Revenue Recognition: Contract Modifications of Licenses of Intellectual Property.” The FASB discussed the project direction based on the recommendation of the EITF at its March 11, 2021 meeting. The FASB removed the project from its technical agenda and will consider the issue as part of the Post-Implementation Review process of Topic 606, Revenue from Contracts with Customers

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
IFRS – IASB Proposes New Approach to Developing Disclosure Requirements in IFRS

Summary - The IASB is seeking public comments on a new approach to developing disclosure requirements in IFRS Standards and new disclosure requirements for the Standards on fair value measurement and employee benefits. These proposals would enable companies to enhance their judgment and reduce ‘boilerplate’ information, giving investors more useful information.

The notes in financial statements sometimes include too little relevant information, too much irrelevant information and information disclosed ineffectively. Stakeholders say this typically occurs when the requirements in IFRS Standards are treated like a checklist without applying effective judgment.

Responding to stakeholder demand for the IASB’s help in addressing these issues, the IASB has set out a new approach to developing the disclosure requirements in IFRS Standards. Disclosure requirements developed using this approach are intended to better enable companies, auditors and others to make more effective materiality judgments and thus provide disclosures that are more useful to investors.

The new approach is written as draft guidance for use by the IASB when developing disclosure requirements in individual Standards. In applying this guidance, the IASB aims to:
  • Enhance investor engagement to ensure the IASB has an in-depth understanding of investors’ information needs and clearly explains those needs in the Standards;
  • Give greater prominence to the objective of disclosure requirements, requiring companies to apply judgment and provide information to meet the described investor needs; and
  • Minimize requirements to disclose particular items of information, and instead to help companies focus on disclosing material information only.

The IASB has tested this new approach using two IFRS Standards—IFRS 13, Fair Value Measurement and IAS 19, Employee Benefits—and has proposed amendments to the disclosure requirements in those Standards in the Exposure Draft.

The IASB is seeking stakeholder feedback on whether the proposed new approach to developing disclosure requirements and proposed amendments to IFRS 13 and IAS 19 would help companies and others improve the usefulness of information disclosed.

The IASB developed the proposals as part of its Disclosure Initiative—Targeted Standards-level Review of Disclosures project. The project is part of the IASB’s work under the theme Better Communication in Financial Reporting and is one of several projects aimed at improving disclosures in the financial statements. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
PPP Loans – AICPA’s Center for Plain English Accounting Publishes Guide on PPP Loans

Summary - The AICPA’s Center for Plain English Accounting has published Accounting for PPP. This publication provides guidance on accounting for PPP loans. 
 
For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Fair Value Hedging – FASB Discusses Comments Received on Proposal

Summary - As reported in its “Summary of Decisions” publication, the FASB met on March 31, 2021, and discussed external review comments on a draft of a proposed Accounting Standards Update (ASU), sweep issues, and whether to issue a proposed ASU. Regarding the Portfolio Layer Method (multiple layer model), the FASB decided the following related to the attributes of assets included in the closed portfolio:
  • All assets in the closed portfolio should have a contractual maturity date on or after the end of the earliest-ending hedge period of hedges associated with the closed portfolio. For each period hedged, the closed portfolio should include an amount of assets with a contractual maturity date on or after the end of the hedge period that is greater than the aggregate amount of the hedged layers. This would allow an entity to segregate the closed portfolio into subgroups based on the contractual maturity dates of the assets in the closed portfolio.
  • All assets in the closed portfolio should be or should become prepayable by the end of the latest-ending hedge period of hedges associated with the closed portfolio.   

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Recent SEC & PCAOB Updates
SEC Staff Views: Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published guidance on certain accounting, financial reporting and governance issues that should be carefully considered before a private operating company undertakes a business combination with a special purpose acquisition company (SPAC). Corp Fin cautions that SPACs are subject to certain limitations that should be considered by the SPAC and the private companies engaging in business combinations with SPACs before undertaking in such a transaction. These include:
  • Financial statements for the acquired business must be filed within four business days of the completion of the business combination pursuant to Item 9.01(c) of Form 8-K. The registrant is not entitled to the 71-day extension of that Item.
  • The combined company will not be eligible to incorporate Exchange Act reports, or proxy or information statements filed pursuant to Section 14 of the Exchange Act, by reference on Form S-1 until three years after the completion of the business combination.
  • The combined company will not be eligible to use Form S-8 for the registration of compensatory securities offerings until at least 60 calendar days after the combined company has filed current Form 10 information.
  • The combined company will be an “ineligible issuer” under Securities Act Rule 405 for three years following the completion of the business combination, which has certain consequences during that period.

Other topics discussed in this guidance include: (a) books and records and internal control requirements; and (b) initial listing standards of National Securities Exchanges.

In connection with Corp Fin’s guidance, SEC Acting Chief Accountant Paul Munter has issued a statement, Financial Reporting and Auditing Considerations of Companies Merging with SPACs. Munter indicates that in just the first two months of 2021, both the number of new SPACs and amount of capital raised by those SPACs have been reported to already match approximately three-fourths of all such activity last year.

Munter indicates that regarding SPAC transactions, it is “critical that the board of directors, audit committee (as applicable), management, and auditors of these operating companies fully understand and fulfill their respective professional responsibilities so that companies meet their obligations under the federal securities laws and investors are provided with high quality financial reporting at the time of the merger and on an ongoing basis in subsequent periods.”

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Views: Staff Guidance on EDGAR Filing of Form C

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has provided guidance on filing Form C related to offerings that rely on Regulation Crowdfunding. Effective March 15, 2021, a company issuing securities in reliance on Regulation Crowdfunding is permitted under Rule 100(a)(1) to raise a maximum aggregate amount of $5 million in a 12-month period. Before the amendments, the limit was $1.07 million. This document provides guidance on:

  • EDGAR Filing of Form C for Regulation Crowdfunding Offerings Exceeding $1,070,000; and
  • EDGAR Filing of Form C by Crowdfunding Issuers and Crowdfunding Vehicles Jointly Filing a Form C.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Staff Speech, Public Input Welcomed on Climate Change Disclosures, Allison Herren Lee, Chairman - March, 2021

Summary - SEC Acting Char Allison Herren Lee issued a statement requesting input on climate change disclosures from investors, registrants, and other market participants. Lee indicates that since 2010, investor demand for, and company disclosure of information about, climate change risks, impacts, and opportunities has grown dramatically. As a result, questions arise about whether climate change disclosures adequately inform investors about known material risks, uncertainties, impacts, and opportunities, and whether greater consistency could be achieved.

Lee recently asked the SEC staff to evaluate agency disclosure rules with an eye toward facilitating the disclosure of consistent, comparable, and reliable information on climate change. Public input on the SEC’s disclosure rules and guidance as they apply to climate change disclosures, and whether and how they should be modified, can include comments on:
  • Existing disclosure requirements in Regulation S-K and Regulation S-X (or, for foreign private issuers, Form 20-F);
  • Potential new SEC disclosure requirements;
  • Potential new disclosure frameworks that the SEC might adopt or incorporate in its disclosure rules; and/or
  • Comments generally as to how the SEC can best regulate climate change disclosures are welcomed.

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Tax Updates
Treasury and IRS Provide Guidance on Tax Relief for Deductions for Food or Beverages from Restaurants

Written by the IRS and available at: https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-tax-relief-for-deductions-for-food-or-beverages-from-restaurants

WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?
Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.

More information for businesses seeking coronavirus related tax relief can be found at IRS.gov.

If you would like additional information, please click here or please feel free to contact our Senior Tax Manager, Nicole Zhao.
Extra Crunch
PCAOB Inspections – PCAOB Releases Spotlight on 2021 Staff Outlook for Inspections and Audit Committee Resource

Summary - The PCAOB has published new resources relating to the 2021 Inspections Program, including a new Spotlight Publication, Staff Outlook for 2021 Inspections. In addition, the PCAOB has released a companion document for audit committees, Audit Committee Resource: 2021 Inspections Outlook.

The new Spotlight provides an overview of the principal changes the PCAOB is making to inspections in 2021 and highlights important areas of planned focus. The Spotlight notes that the 2021 program was developed with “two primary objectives: (1) respond to the financial reporting and audit risks posed by the COVID-19 pandemic, and (2) reduce the predictability” of the inspections. In addition, the PCAOB expects that they will conduct inspections remotely for the foreseeable future. The Spotlight also includes:

“Six Reminders for Auditors:”
  • Information on audit areas with continued deficiencies and opportunities for potential improvement;
  • Compliance with auditor independence requirements;
  • Fraud procedures;-Determining and communicating critical audit matters;
  • Implementing new auditing standards;
  • Responding to cyber threats; and
  • Auditing digital assets.

The PCAOB expects the companion Audit Committee Resource to be helpful for audit committees in informing constructive dialogue with their auditors. Like the Spotlight, it provides an overview to changes being made for 2021 inspections and highlights important areas of planned inspection focus. 

For more information, click here.

© 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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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