We are pleased to release MaloneBailey's October 2023 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
www.malonebailey.com
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What's the Crunch?
Featured Podcast
- Cybersecurity in the CPA Firm Environment
Recent Accounting & Regulatory Updates
Recent FASB & AICPA Updates
- Attestation Engagements –AICPA’s ASB Proposes SSAE for Consistency with AICPA Quality Management Standards
- Joint Ventures –FASB Issues Standard on Accounting for Joint Venture Formations
- Annual Improvements - IASB Proposes Annual Improvements to IFRSs
- Crypto Assets –FASB Discusses Accounting for Crypto Assets
- Income Tax –FASB Discusses Improvements to Income Tax Disclosures
Recent SEC & PCAOB Updates
- SEC Staff Guidance –Corp Fin Updates Compliance and Disclosure Interpretations
- EDGAR –SEC Proposes Improvements to EDGAR Filer Access and Account Management
- XBRL –SEC Staff Publishes Letter on XBRL Disclosures
Tax
- IRS Improved 2023 Filing Season Service
Extra Crunch
- Nasdaq’s World Reimagined Podcast
About MaloneBailey, LLP
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Cybersecurity in the CPA Firm Environment
Summary - Technology has evolved to where we can store everything we need in one convenient place at just the click of a button, however, this convenience comes at a cost as it’s now easier than ever for someone to get into your system and take your sensitive information. It’s important to familiarize yourself and stay a few steps ahead of these looming cyber threats to prepare and train yourself in case there are any attempts of a breach.
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.
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Recent FASB & AICPA Updates | |
Attestation Engagements –AICPA’s ASB Proposes SSAE for Consistency with AICPA Quality Management Standards
Summary - The AICPA’s Auditing Standards Board (ASB) has issued the Exposure Draft, Proposed Statement on Standards for Attestation Engagements – Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management, and supplementary material to the Exposure Draft. The deadline for comments is December 1, 2023.
Reasons for the Proposed SSAE
The Exposure Draft proposes amendments to the Statements on Standards for Attestation Engagements (SSAE) to make the SSAEs consistent with the quality management (QM) standards issued by the ASB and the Accounting and Review Services Committee (ARSC) in the summer of 2022.
The Exposure Draft, if issued as proposed, would amend (a) SSAE No. 18, Attestation Standards: Clarification and Recodification, AT-C sections 105, Concepts Common to All Attestation Engagements, and 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting; (b) SSAE No. 19, Agreed-Upon Procedures Engagements, AT-C section 215; (c) SSAE No 21, Direct Examination Engagements, AT-C section 205, Assertion-Based Examination Engagements; and (d) SSAE No. 22, Review Engagements, AT-C section 210.
The previously issued QM standards include:
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Statement on Quality Management Standards (SQMS) No. 1, A Firm's System of Quality Management;
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SQMS No. 2, Engagement Quality Reviews;
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Statement on Auditing Standards (SAS) No. 146, Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards; and
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Statement on Standards for Accounting and Review Services (SSARS) No. 26, Quality Management for an Engagement Conducted in Accordance with Statements on Standards for Accounting and Review Services.
The ASB and the ARSC developed the previously issued QM standards to converge with standards issued by the International Auditing and Assurance Standards Board (IAASB).
In developing the QM amendments for the SSAEs, the ASB was concerned with issues of engagement quality, “a firm’s responsibilities to design, implement, and operate a system of quality management for its accounting and auditing practice”; and firm leadership responsibilities. The ASB does not believe that the amendments, if issued as proposed, will “significantly affect practice,” given that the ASB’s intention with the proposals is to amend the SSAEs to require that practitioners comply with the existing QM standards.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Joint Ventures –FASB Issues Standard on Accounting for Joint Venture Formations
Summary - The FASB issued Accounting Standard Update (ASU) No. 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, intended to (1) provide investors and other allocators of capital with more decision-useful information in a joint venture’s separate financial statements and (2) reduce diversity in practice in this area of financial reporting.
The ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification® Master Glossary. While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements, specifically the joint venture’s recognition and initial measurement of net assets, including businesses contributed to it. Stakeholders noted that the lack of guidance has resulted in diversity in practice in how contributions to a joint venture upon formation are accounted for by the joint venture.
The amendments in the ASU provide decision-useful information to a joint venture’s investors and reduce diversity in practice by requiring that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).
The amendments in this ASU are effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. Additionally, a joint venture that was formed before the effective date of the ASU may elect to apply the amendments retrospectively if it has sufficient information.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Annual Improvements –IASB Proposes Annual Improvements to IFRSs
Summary - The IASB has proposed narrow-scope amendments to IFRS Accounting Standards and accompanying guidance as part of its periodic maintenance of the Accounting Standards.
As explained in the IFRS Foundation’s Due Process Handbook, annual improvements are limited to changes that either clarify the wording in an IFRS Accounting Standard, or correct relatively minor unintended consequences, oversights or conflicts between requirements of the Accounting Standards. The proposed improvements are packaged together in one document.
The proposed amendments in this edition of the annual improvements include clarifications, simplifications, corrections or changes to improve consistency in:
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IFRS 1, First-time Adoption of International Financial Reporting Standards;
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IFRS 7, Financial Instruments: Disclosures, and accompanying Guidance on implementing IFRS 7;
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IFRS 9, Financial Instruments;
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IFRS 10, Consolidated Financial Statements; and
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IAS 7, Statement of Cash Flows.
The deadline for comments is December 11, 2023.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Crypto Assets –FASB Discusses Accounting for Crypto Assets
Summary - As discussed in its “Summary of Decisions” publication, the FASB met on September 6, 2023. The FASB discussed comment letter feedback and issues for redeliberations on the proposed ASU, Intangibles: Goodwill and Other: Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Income Tax –FASB Discusses Improvements to Income Tax Disclosures
Summary - As discussed in its “Summary of Decisions” publication, the FASB met on August 30, 2023. The FASB discussed feedback received and issues for redeliberation on the proposed ASU, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Recent SEC & PCAOB Updates | |
SEC Staff Guidance –Corp Fin Updates Compliance and Disclosure Interpretations
Summary - The staff in the Division of Corporation Finance (Corp Fin) has updated the following Compliance and Disclosure Interpretations (C&DIs):
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Exchange Act Rules (new questions 120.29 -120.31);
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Exchange Act Section 16 and Related Rules and Forms (new question 135.04); and
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Regulation S-K (new questions 133A.01 -133A.02).
Corp Fin has provided guidance on manipulative/deceptive devices and insider trading arrangements and policies.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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EDGAR –SEC Proposes Improvements to EDGAR Filer Access and Account Management
Summary - The SEC proposed rule and form amendments to improve filer access to and management of accounts on the SEC’s EDGAR system. According to the SEC, the proposed amendments would “require EDGAR filers to authorize identified individuals who would be responsible for managing filers’ EDGAR accounts. In addition, individuals acting on behalf of filers on EDGAR would need individual account credentials to access those EDGAR accounts and make filings. If the proposed amendments are later adopted, the SEC will make technical changes to EDGAR, including to make available to EDGAR filers certain Application Programming Interfaces (APIs) for machine-to-machine submissions on EDGAR and retrieval of related filing information.”
The SEC also announced that it will open to the public a beta software environment for filer testing and feedback, which will reflect the proposed rule and form amendments and the related technical changes, on September 18, 2023. Information about signing up for beta testing and extensive additional information about the proposal and related technical changes can be found on the EDGAR Next—Filer Access and Account Management page on the SEC’s website.
The public comment period will remain open until 60 days after the date of publication of the proposing release in the Federal Register.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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XBRL –SEC Staff Publishes Letter on XBRL Disclosures
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published a Sample Letter to Companies Regarding Their XBRL Disclosures. This illustrative letter contains sample comments that, depending on the particular facts and circumstances, and type of filing under review, Corp Fin may issue to certain companies. These sample comments do not constitute an exhaustive list of the issues that companies should consider as they prepare their XBRL and Inline XBRL disclosures.
For more information, click here.
© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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IRS Improved 2023 Filing Season Service
By Travis Moffett, Tax Manager
Summary - The IRS has announced that it has made some progress toward its goal of modernizing technology to help deliver better service. Two new milestones have been achieved as part of its Paperless Processing Initiative: Scanning 225 times more forms compared to 2022 and enabling taxpayers to reply to an additional 51 forms and letters online. Let’s discuss these improvements and other initiatives implemented below.
Customer Callback Option
In the past, many taxpayers and their tax advisors have expressed frustration over long hold times when trying to contact the IRS by phone. To deal with this issue, the IRS has implemented a customer callback option to cover up to 95% of callers seeking live assistance. The main goal is to enhance the taxpayer’s experience by offering more options when there are extremely high call volumes.
Pop-Up Taxpayer Assistance Centers
The IRS has installed new Pop-Up Taxpayer Assistance Centers to give more taxpayers an opportunity to interact face-to-face with IRS customer service representatives. The IRS has conducted these events in Paris, Texas; Alpena, Michigan; Hastings, Nebraska and Twin Falls, Idaho. There are also plans to host Pop-Up Taxpayer Assistance Centers in Juneau, Alaska; Lihue, Hawaii; Baker City, Oregon; and Gallup, New Mexico.
Responding to Notices and File Online
Until the 2023 filing season, taxpayers and their tax advisors have had to respond to notices requesting things like document verification through the mail. The IRS has announced that taxpayers are now able to respond to notices online and have new online filing options. The updated IRS notices and letters will include instructions to guide taxpayers to the appropriate upload tool. The IRS has also launched an online portal to allow for the filing of Forms 1099 electronically. The goal is to help small businesses save time and money with this online filing process.
Paperless Processing Initiative
With the use of Inflation Reduction Act resources, the IRS has launched a plan to achieve paperless processing by Filing Season 2025 which will digitize all paper-filed returns when received. Once a paper filed return is received it will be converted to digital form as soon as it arrives at the IRS. So far, the IRS has scanned 849,000 forms this year, including 481,400 Forms 940, 304,000 Forms 941, and 64,000 Forms 1040. In total that is 225 more forms than were scanned in the previous year.
Final Thoughts
It’s encouraging to see that the IRS is implementing processes to help reduce the backlog that has existed since the COVID-19 pandemic. Significant improvements were needed to help enhance the taxpayer’s overall experience as the IRS’ outdated IT systems have made achieving simple tasks a challenge. Thanks to the Inflation Reduction Act, it appears that upgrades are finally being made with more improvements to be expected in the near future.
For additional information, please contact Nicole Zhao, Tax Partner, at nzhao@malonebailey.com.
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The World Reimagined Podcast by Nasdaq
Summary - "World Reimagined Podcast" is a podcast offered by Nasdaq where host Gautam Mukunda uncovers what it takes to lead through times of change and crisis, featuring unexpected conversations with global leaders spanning from business to politics, armed forces to space exploration. New episodes of the podcast are released every other Tuesday.
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