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Featured Podcast 

The featured podcast in the October 2017 newsletter features Jason Paltrowitz, Executive Vice President of Corporate Services at OTC Markets Group and Caroline Rosen, MaloneBailey's Marketing Manager as they discuss the findings of the inaugural Small Cap Survey. Listen below to hear what kinds of challenges small companies face when it comes to driving and increasing investor interest in their stock.  Please click  here for full survey findings. 

Missed our Look Ahead for 2018?

Visit our website for the July 2017 newsletter, which highlights 
the  FASB updates that will be going into effect in 2018.

October 2017

We are pleased to release MaloneBailey's October 2017 newsletter highlighting recent SEC and FASB updates and proposals. Please note that the updates provided in this newsletter are not a comprehensive list. We have selected the updates that we believe may be relevant to you. Our goal is to provide you with resources to keep you informed of the ever-changing rules and regulations related to regulatory and accounting matters. 

We encourage you to visit the SEC and FASB 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. You can find a list of MaloneBailey partners and their contact information at the end of this newsletter. 

For easy navigation, please refer to the 'In This Issue' section, which contains a hyperlinked table of contents of rule regulation proposals and updates that may affect you. We invite you to visit our website to review archived versions of this newsletter containing past SEC and FASB updates and proposals.

The MaloneBailey Team
OTC Markets Group Shares Update on Improving Access to Capital Act Passed in the House

OTC Markets Group recently  shared exciting news regarding their ongoing efforts to expand Regulation A+ to allow SEC reporting companies the opportunity to take part in this important form of online capital raising.
This week the bipartisan bill, Improving Access to Capital Act (H.R. 2864), sponsored by Representative Krysten Sinema and Representative Trey Hollingsworth, passed in the House of Representatives with an overwhelming majority vote of 403 to 3.
"We are excited to see the House of Representatives pass HR 2864, Improving Access to Capital Act, and we commend Representatives Sinema and Hollingsworth for sponsoring this bipartisan legislation that will give all SEC reporting companies the ability to raise capital online under Regulation A+. This effort is vital to lowering the cost of capital formation and fostering economic growth for US companies," said Cromwell Coulson, Chief Executive Officer and President of OTC Markets Group. 
This milestone is one step closer to improving the capital raising process for small companies and easing the burdens of entry to the public markets.
"Expanding the scope of eligible issuers under Regulation A+ to include fully SEC reporting companies enhances the opportunity for capital formation for these job-creating companies. Seeing this bipartisan bill, sponsored by Representatives Sinema and Hollingsworth, pass in the House of Representatives is a significant step forward for US companies," said Dan Zinn, OTC Markets General Counsel.

In This Issue

          Recent FASB Updates & Proposals

Summary The FASB has issued an Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard is intended to improve and simplify accounting rules around hedge accounting. The ASU is effective for public companies in 2019 and private companies in 2020. Early adoption is permitted.
The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.
The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary  As reported in its "Summary of Board Decisions" publication, the FASB met on August 30, 2017, and discussed working definitions of an asset and a liability. The FASB decided to eliminate the terms probable, future economic benefits, sacrifices of economic benefits, and past transactions or events from the FASB's revised definitions. The FASB directed its staff to further analyze whether the term control is necessary in the definition of an asset.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

             Recent SEC Updates & Proposals

Summary The SEC has issued a release to update its 2005 Commission Guidance Regarding Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. The release states that consistent with ASC Topic 606, manufacturers should recognize revenue for vaccines that are placed into the Vaccines for Children Program and the Strategic National Stockpile. The release states that until a registrant adopts ASC Topic 606, it should continue referring to the guidance included in the 2005 Release.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary The SEC issued a release to update its guidance for bill-and-hold arrangements by stating that registrants should no longer refer to the criteria in Accounting and Auditing Enforcement Release No. 108, In the Matter of Stewart Parness (AAER 108), to recognize revenue for such arrangements upon the registrants' adoption of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. The release states that until a registrant adopts ASC Topic 606, it should continue referring to the guidance included in AAER 108.

For more information, click here .
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary SEC Chief Accountant Wesley R. Bricker recently spoke before a banking and savings institutions conference in Washington, D.C. Mr. Bricker's remarks touched on several current issues the SEC's Office of the Chief Accountant (OCA) staff has been focused on recently, including:
  • The role of financial reporting in our financial and capital markets;
  • Recent accounting and auditing standard setting; and
  • Reminders regarding the importance of broker-dealer compliance as well as regulatory and financial reporting requirements relating to initial coin offerings.
Highlights of Remarks
  • OCA remains focused on the importance of high quality financial reporting, which is essential to the financial services sector and, more generally, to our financial and capital markets system. Banks, in particular, are both users and providers of financial reporting information as they intermediate between those who have funds to save or invest and those who need financing.
  • While banking involves risk-taking, a number of the risks relate directly to the value provided by banks to their customers and the wider economy. Managing and pricing these risks depends, in part, on reliable financial information. As accountants, we need to continue to challenge ourselves to provide the nature and quality of financial information that investors need.
  • As to implementation of the FASB's new credit losses standard, companies will need to evaluate the specific impact of the standard and apply judgment in preparing an estimate of the overall current expected credit losses.
  • Mr. Bricker anticipates that relevant portions of the Commission and SEC staff guidance will continue to apply to the development, documentation, and application of a systematic methodology for determining an estimate of current expected credit losses, which under the new standard, will apply to an entity's estimate of losses over the entire contractual life.
  • The OCA staff is actively monitoring the transition period activities related to the credit losses standard and continues to evaluate any issues identified by various stakeholders post issuance. OCA will continue to respect well-reasoned, practical judgments that are grounded in the new standard and are consistent with Commission requirements and SEC staff guidance. Transition plans for the new standard should include initiatives for identifying and implementing any necessary changes to internal control over financial reporting.
Mr. Bricker also commented on the SEC's report on its investigation of an offering of digital tokens by an unincorporated virtual organization. The report makes clear that the federal securities laws apply to those who offer and sell securities in the U.S., regardless of whether the issuing entity is a traditional company or a decentralized autonomous organization, whether those securities are purchased using U.S. dollars or virtual currencies, or whether they are distributed in certificated form or through distributed ledger technology.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Summary - T he SEC's Office of the Chief Accountant and Division of Corporation Finance released Staff Accounting Bulletin (SAB) No. 116 that brings existing SEC staff guidance into conformity with the FASB's adoption of and amendments to ASC Topic 606. The SAB modifies:
  • SAB Topic 13, Revenue Recognition;
  • SAB Topic 8, Retail Companies; and
  • Section A, Operating-Differential Subsidies of SAB Topic 11, Miscellaneous Disclosure.
The guidance in SAB 116 applies upon a registrant's adoption of ASC Topic 606. Until such time, the SAB states that registrants should continue referring to prior staff guidance on revenue recognition.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC05SEC Staff Views: SEC Staff Publishes Report on Access to Capital and Market Liquidity

SummaryThe SEC Division of Economic and Risk Analysis (DERA) has published the report, Access to Capital and Market Liquidity (Report). The Report evaluates the availability of capital and trends in both primary securities issuance and secondary market liquidity. It also assesses the relationship between those trends and post-financial crisis regulatory reforms.
The SEC Staff prepared the report in accordance with a request by Congress as part of the FY2016 appropriations process. Congress requested information on the impacts of the Dodd-Frank Act, particularly the Volcker Rule, and Basel III, in particular, on: (a) access to capital for consumers, investors, and businesses; and (b) market liquidity, including U.S. Treasury and corporate debt markets.
The Report includes a survey and analysis of recent academic literature, as well as original analyses drawn from publicly available databases and non-public regulatory filings. DERA examined data related to issuance of debt, equity, and asset-backed securities as well as activity and liquidity in U.S. Treasuries, corporate bonds, single-name credit default swaps, and bond funds.
The Report identifies trends for unregistered offerings, such as those under Regulation D and Regulation Crowdfunding, as well as fixed income transactions, fixed income quotations, and broker-dealer financial positions.
The Report provides detailed analyses of and data on the items DERA investigated. Overall, in its results, the Report notes that "We do not find that total primary market security issuance is lower after the enactment of the Dodd-Frank Act (including during the implementation of the Volcker Rule) and during the implementation of Basel III, and it may have increased around the implementation of the JOBS Act."
However, regarding market liquidity, the Report indicates that the evidence "for the impact of regulatory reforms on market liquidity is mixed, with different measures of market liquidity showing different trends," and "many of the observed changes in these measures are consistent with the combined impacts of several factors besides new rules and regulations, including, among others, electronification of markets, changes in macroeconomic conditions, and post-crisis changes in dealer risk preferences that pre-date the passage of either the Dodd-Frank Act or Basel III."

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC06SEC Policymaking - SEC Discusses Materiality and Auditors Report

SummaryStephen Deane, Investor Engagement Advisor in the SEC's Office of the Investor Advocate, recently spoke at a conference for management accountants in Tulsa, OK. Mr. Deane discussed two mini-case studies on policymaking related to materiality and the independent auditor's report. Mr. Deane noted that these "two mini-case studies are meant to give you a sense of the policymaking process and the dilemmas that policymakers wrestle with. They also will illustrate a fundamental difference between outside investors and managers inside the company..."
Mr. Deane provided a technical review of the FASB's efforts on establishing guidance on materiality and the PCAOB's efforts to expand the independent auditor's report. Mr. Deane noted that "the materiality debate and the expanded audit report illustrate policymakers' efforts to reduce the informational asymmetries that investors inevitably face as outsiders." Mr. Deane urged management accountants in attendance to remember the importance of their work, "not only for producing financial information for use by management inside your companies, but also ultimately to provide the financial disclosures that investors rely upon, that are indispensable to our capital markets and our economy, and that benefit all of us."
The Office of the Investor Advocate was established at the SEC on February 24, 2014. The Investor Advocate's mission is to be the eyes and ears for investors and, when necessary, to provide a voice for them in Washington. The Investor Advocate seeks to ensure that the interests of investors are considered as policy decisions are made at the SEC and also at the self-regulatory organizations that the Commission oversees.

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC07SEC Staff Guidance - SEC Updates Interpretations

SummaryThe staff in the Division of Corporation Finance (Corp Fin) has updated the following Compliance and Disclosure Interpretations (C&DIs):
  • Fixing America's Surface Transportation (FAST) Act (Updated Question 1); and
  • Securities Act Forms (New Questions 101.04 and 101.05).
These C&DIs provide the Corp Fin staff's interpretations related to SEC forms, rules, and regulations and are updated periodically. The updates to these C&DIs focus in on financial information requirements for Emerging Growth Companies. 

For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.