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September 2016 

Greetings,

We are pleased to release MaloneBailey's September 2016 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 and proposals that we believe may be of relevance to you. Our goal is to provide you with resources to keep you informed of the ever-changing rules and regulations pertaining 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 and 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 and regulation updates and proposals 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
 
In This Issue

SEC Updates & Proposals
FASB Updates & Proposals
     Recent SEC Updates & Proposals
SEC1Disclosure of Payments by Resource Extraction Issuers 

Summary -  The SEC announced it adopted rules to require resource extraction issuers to disclose payments made to governments for the commercial development of oil, natural gas or minerals. The rules, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, are intended to further the statutory objective to advance U.S. foreign policy interests by promoting greater transparency about payments related to resource extraction. These rules were adopted to replace previous rules that were initially adopted by the SEC on August 22, 2012, but were subsequently vacated by the U.S. District Court for the District of Columbia.
 
The final rules require an issuer to disclose payments made to the U.S. federal government or a foreign government if the issuer engages in the commercial development of oil, natural gas, or minerals and is required to file annual reports with the SEC under the Securities Exchange Act. The issuer must also disclose payments made by a subsidiary or entity controlled by the issuer. Specifically, under the final rules, resource extraction issuers must disclose payments that are:
  • Made to further the commercial development of oil, natural gas, or minerals (as defined in the rules);
  • Not de minimis, which is defined in the rules as any payment, whether a single payment or a series of related payments, which equals or exceeds $100,000 during the same fiscal year; and
  • Within the types of payments specified in the rules.
The required disclosure will be filed publicly with the SEC annually on Form SD no later than 150 days after the end of its fiscal year. The information must be included in an exhibit and electronically tagged using the eXtensible Business Reporting Language format. Resource extraction issuers are required to comply with the rules starting with their fiscal year ending no earlier than September 30, 2018.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC2Disclosure Update and Simplification

Summary - The SEC voted unanimously (3-0) to issue proposed amendments for public comment to address redundant, duplicative, overlapping, outdated, or superseded disclosure requirements. Chair White indicated that these proposed amendments are a modest, but important step in the overall ongoing efforts of the SEC and its staff to review existing SEC disclosure requirements. The SEC has included specific proposed technical amendments to delete redundant or duplicative disclosures requirements. In addition, the SEC seeks public comment on certain disclosures that may be overlapping with other already required disclosures or are outdated. The SEC staff indicated that it believes that the disclosure changes proposed would not significantly change the information currently being provided to investors. However, the SEC staff is interested in hearing from interested groups, including feedback on those cases where current disclosures would move to other places within an SEC filing and whether such movement changes the prominence of that disclosure. The SEC staff indicated that the changes in the proposal would primarily impact public companies, including Foreign Private Issuers, but that it would also impact other SEC regulated entities, including broker-dealers and investment companies.
 
Comments on the proposal are due 60 days from publication in the Federal Register.

For more information, click  here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC3Amendments to Smaller Reporting Company Definition

Summary -  The SEC proposed amendments that would increase the financial thresholds in the "smaller reporting company" definition. The proposal to update the definition would expand the number of companies that qualify as smaller reporting companies, thus qualifying for certain existing scaled disclosures provided in Regulation S-K and Regulation S-X. Smaller reporting companies may provide scaled disclosures under the Commission's rules and regulations. The proposed rules would enable a company with less than $250 million of public float to provide scaled disclosures as a smaller reporting company, as compared to the $75 million threshold under the current definition. In addition, if a company does not have a public float, it would be permitted to provide scaled disclosures if its annual revenues are less than $100 million, as compared to the current threshold of less than $50 million in annual revenues.
 
In addition, as in the current rules, once a company exceeds either of the thresholds, it will not qualify as a smaller reporting company again until public float or revenues decrease below a lower threshold. Under the proposal, a company would qualify only if its public float is less than $200 million or, if it has no public float, its annual revenues are less than $80 million.
 
The SEC is not proposing to increase the $75 million threshold in the "accelerated filer" definition. As a result, companies with $75 million or more of public float that would qualify as smaller reporting companies would be subject to the requirements that apply currently to accelerated filers, including the timing of the filing of periodic reports and the requirement that accelerated filers provide the auditor's attestation of management's assessment of internal controls over reporting required by Section 404(b) of the Sarbanes-Oxley Act of 2002.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC4Modernization of Property Disclosures for Mining Registrants

Summary -  The SEC announced that it has proposed rules to modernize the disclosure requirements for mining properties by aligning them with current industry and global regulatory practices and standards. The proposed revisions would update disclosure requirements for mining registrants in Item 102 of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and related guidance in Industry Guide 7.
 
"These proposed rules would modernize the Commission's disclosure requirements by aligning them with global standards and give investors more comprehensive information of a registrant's mining properties that they can use to make informed investment decisions," said SEC Chair Mary Jo White. "This proposal is another product of our disclosure effectiveness initiative, which is aimed at modernizing our disclosure regime and providing more meaningful information to investors."
 
The Commission's proposed rules would:
  • Provide one standard requiring registrants to disclose mining operations that are material to the company's business or financial condition;
  • Require a registrant to disclose mineral resources and material exploration results in addition to its mineral reserves;
  • Permit disclosure of mineral reserves to be based on a preliminary feasibility study or a final feasibility study;
  • Provide updated definitions of mineral reserves and mineral resources;
  • Require, in tabular format, summary disclosure for a registrant's mining operations as a whole as well as more detailed disclosure for material individual properties;
  • Require that every disclosure of mineral resources, mineral reserves and material exploration results reported in a registrant's filed registration statements and reports be based on, and accurately reflect information and supporting documentation prepared by, a "qualified person"; and
  • Require a registrant to obtain a technical report summary from the qualified person, which identifies and summarizes for each material property the information reviewed and conclusions reached by the qualified person about the registrant's exploration results, mineral resources or mineral reserves
In addition, the proposed rules would rescind Industry Guide 7 and include the SEC's mining property disclosure requirements in a new subpart of Regulation S-K.
 
Public comment on the proposed rule should be received by the Commission no later than 60 days after publication in the Federal Register.
For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

      Recent FASB Updates & Proposals
FASB1FASB Proposed Statement of Financial Accounting Concepts - Concepts Statement 8 - Conceptual Framework for Financial Reporting - Chapter 7: Presentation

Summary -  The FASB has issued for public comment an exposure draft related to its conceptual framework presentation project. Comments are due by November 9, 2016.
 
The exposure draft, Conceptual Framework for Financial Reporting: Chapter 7: Presentation, describes proposed concepts related to how recognized items should be presented in a financial statement. This chapter will become a basis for the FASB when creating presentation requirements in future standards.
 
The proposal is designed to provide a foundation for future standards to enhance financial statement users' abilities to assess prospects for future cash flows by addressing how to:
  • Group individual recognized items into line items and subtotals; and
  • Clarify the relationships among assets, liabilities, and equity and the effects of related changes of those assets and liabilities on comprehensive income and cash flows.
"The Conceptual Framework is the foundation for resolving accounting and reporting questions," stated FASB Chair Russell G. Golden. "These proposals are intended to provide direction, structure and a basis for consistent Board conclusions when making standard setting decisions related to presentation."
 
The proposal is part of the FASB's larger conceptual framework project, which is also addressing measurement and disclosure concepts.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB2FASB Invitation to Comment 2016-290 - Agenda Consultation 

Summary -  The FASB has issued for public comment an Invitation to Comment-Agenda Consultation. The purpose of this document is to solicit feedback about the financial reporting issues that the FASB considers adding to its agenda. The FASB requests feedback about the following:
  • Are the financial reporting issues described in this ITC areas for which there is potential for significant improvement?
  • What is the priority of addressing each issue?
  • What approach should the FASB take to address each issue?
  • Are there other major areas of financial reporting not described in this ITC that the FASB should consider adding to its agenda?
Comments are due by October 17, 2016.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB3FASB Proposed Accounting Standards Update 2016-270 - Income Taxes (Topic 740): Disclosure Framework - Changes to the Disclosure Requirements for Income Taxes 
 
Summary -  The FASB has issued a proposed Accounting Standards Update (ASU), Income Taxes (Topic 740): Disclosure Framework - Changes to the Disclosure Requirements for Income Taxes. The proposed amendments would modify the current disclosure requirements for income taxes.
 
The following additional disclosures would be required by Topic 740 for all entities on the basis of the proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting - Chapter 8: Notes to Financial Statements:
  1. Description of an enacted change in tax law that is probable to have an effect on the reporting entity in a future period;
  2. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign;
  3. Income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign;
  4. Income taxes paid disaggregated between domestic and foreign, and the amount of income taxes paid to any country that is significant to total income taxes paid;
  5. An explanation of circumstances that caused a change in assertion about the indefinite reinvestment of undistributed foreign earnings and the corresponding amount of those earnings; and
  6. The aggregate of cash, cash equivalents, and marketable securities held by foreign subsidiaries.
The following disclosures would be required for public business entities by Topic 740 on the basis of the proposed Concepts Statement:
  1. Within the reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period, settlements using existing deferred tax assets separate from those that have been or will be settled in cash.
  2. The line items in the statement of financial position in which the unrecognized tax benefits are presented and the related amounts of such unrecognized tax benefits. If the unrecognized tax benefits are not presented in the statement of financial position, those amounts should be disclosed separately.
  3. The amount and explanation of the valuation allowance recognized and/or released during the reporting period.
  4. The total amount of unrecognized tax benefits that offsets the deferred tax assets for carryforwards.
The proposed amendments would modify the existing rate reconciliation requirement for public business entities to be consistent with U.S. Securities and Exchange Commission Regulation S-X 210.4-08(h), Rules of General Application - General Notes to Financial Statements: Income Tax Expense. That regulation requires separate disclosure for any reconciling item that amounts to more than 5 percent of the amount computed by multiplying the income before tax by the applicable statutory federal income tax rate. The proposed amendments would further modify the requirement to explain the changes in those reconciling items from year to year.

For more information, click  here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB4FASB Proposed Accounting Standards Update 2016-260 - Consolidation (Topic 810): Interests Held Through Related Parties that are Under Common Control 

Summary -   The FASB has issued a proposed ASU,  Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control.  Comments are due by July 25, 2016. The proposed amendments would affect reporting entities that are required to evaluate whether they should consolidate a variable interest entity, in certain situations involving entities under common control. Specifically, the proposed amendments would change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity would treat indirect interests in the entity held through related parties that are under common control with the reporting entity.
 
The proposed amendments would not change the characteristics of a primary beneficiary. A primary beneficiary of a variable interest entity has both of the following characteristics: (1) the power to direct the activities of a variable interest entity that most significantly impact the variable interest entity's economic performance; and (2) the obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.
 
If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the proposed amendments would require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. That is, under the proposed amendments, a single decision maker would no longer be required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety and, instead, would include such interests on a proportionate basis consistent with indirect interests held through other related parties.
 
If, after performing that assessment, a reporting entity that is the single decision maker of a variable interest entity concludes it does not have the characteristics of a primary beneficiary, the proposed amendments would continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the single decision maker and its related parties that are under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the variable interest entity is the primary beneficiary.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB5FASB Proposed Accounting Standards Update 2016-250 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets 

Summary -  The FASB has issued proposed Accounting Standards Update (ASU), Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. Comments are due by August 5, 2016.
 
The proposed amendments would:
  • Clarify the scope of Subtopic 610-20 and partial sales of nonfinancial assets;
  • Improve consistency in determining what constitutes an in substance nonfinancial asset;
  • Simplify GAAP by conforming several accounting differences between transactions involving assets and businesses related to the measurement of retained noncontrolling ownership interests, the measurement of the gain or loss recognized upon transferring a nonfinancial asset to an equity method investee, the gain or loss recognized upon contributions to joint ventures, and transfers of noncontrolling ownership interests;
  • Streamline GAAP by eliminating Section 845-10-30 and removing exceptions to the financial asset derecognition model; and
  • Clarify the accounting for contributions of nonfinancial assets to joint ventures.
Scope of the Nonfinancial Asset Derecognition Guidance
The proposed amendments would clarify the scope of the nonfinancial asset guidance in Subtopic 610-20. Under the clarified scope, entities would apply the guidance to the derecognition of all nonfinancial assets and in substance nonfinancial assets unless other specific guidance applies.
 
Distinct Nonfinancial Assets
The proposed amendments specify that a distinct nonfinancial asset would be the unit of account for applying the nonfinancial asset derecognition guidance. At contract inception, an entity would identify the nonfinancial assets and in substance nonfinancial assets in the contract and apply the guidance from Topic 606 on identifying performance obligations to identify the distinct nonfinancial assets. The proposed amendments also specify that entities would be required to allocate consideration to each distinct nonfinancial asset by applying the guidance from Topic 606 on allocating the transaction price to performance obligations.
 
Partial Sales
The current nonfinancial asset guidance does not address partial sales of nonfinancial assets. The proposed amendments also would provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within Subtopic 610-20.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB6FASB Proposed Accounting Standards Update 2016-240 - Technical Corrections and Improvements to Update No. 2014-09, Revenue from Contracts with Customers (Topic 606)

Summary -   The FASB has issued a proposed Accounting Standards Update (ASU), Technical Corrections and Improvements to Update No. 2014-09, Revenue from Contracts with Customers (Topic 606).  Comments are due July 2, 2016.
 
The proposed amendments are of a similar nature to the items typically addressed as technical corrections and improvements. However, the FASB decided to issue a separate proposal for technical corrections and improvements to Topic 606 and other Topics amended by ASU 2014-09 to increase stakeholders' awareness of the proposals and to expedite improvements to ASU 2014-09. The proposed amendments affect narrow aspects of the guidance issued in ASU 2014-09 as described below.
 
Issue 1: Preproduction Costs Related to Long-Term Supply Arrangements.  The proposed amendments would supersede the guidance on preproduction costs related to long-term supply arrangements in Subtopic 340-10. As a consequence, if the costs previously within the scope of Subtopic 340-10 relate to a contract with a customer, an entity would apply the guidance in Subtopic 340-40 upon the adoption of Update 2014-09.
 
Issue 2: Contract Costs-Impairment Testing.  The proposed amendments would clarify that when performing impairment testing an entity should: (a) consider expected contract renewals and extensions; and (b) include both the amount of consideration it already has received but has not recognized as revenue and the amount the entity expects to receive in the future.
 
Issue 3: Contract Costs-Interaction of Impairment Testing with Guidance in Other Topics.  The proposed amendments would clarify that impairment testing first should be performed on assets outside the scope of Topic 340 (i.e., Topic 330, Inventory), then assets within the scope of Topic 340, then asset groups and reporting units within the scope of Topic 360, Property, Plant, and Equipment, and Topic 350, Intangibles-Goodwill and Other.
 
Issue 4: Provisions for Losses on Construction-Type and Production-Type Contracts.  The proposed amendments would require that the provision for losses be determined at least at the contract level. However, the proposed amendments would allow an entity to determine the provision for losses at the performance obligation level as an accounting policy election.
 
Issue 5: Scope of Topic 606.  The proposed amendment would remove the term insurance from the scope exception to clarify that all contracts within the scope of Topic 944 are excluded from the scope of Topic 606.
 
Issue 6: Disclosure of Remaining Performance Obligations.  The proposed amendments would: (a) provide practical expedients to the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration in order to recognize revenue; and (b) expand the information disclosed when an entity applies one of the practical expedients.
 
Issue 7: Contract Modifications Example.  The proposed amendments would improve the alignment of Example 7 and the principles in Topic 606.
 
Issue 8: Fixed-Odds Wagering Contracts in the Casino Industry.  The proposed amendments would: (a) create a new Subtopic 924-815, Entertainment-Casinos-Derivatives and Hedging, which would include a scope exception from derivatives guidance for fixed-odds wagering contracts; and (b) include a scope exception within Topic 815, Derivatives and Hedging, for fixed odds wagering contracts issued by casino entities.
 
Issue 9: Cost Capitalization for Advisors to Private and Public Funds.  The proposed amendments would align the cost-capitalization guidance for advisors to both public funds and private funds in Topic 946.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB7FASB Proposed Accounting Standards Update 2016-230 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment

Summary -   The FASB has issued a proposed ASU,  Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.  Comments are due by July 11, 2016.
 
The proposed amendments would modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. The FASB proposes removing Step 2 from the current goodwill impairment test, which includes determining the implied fair value of goodwill and comparing it with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity must perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in a purchase price allocation for an acquired business.

Under the proposed amendments, an entity would perform its annual, or any interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity generally would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. However, that amount should not exceed the carrying amount of goodwill allocated to that reporting unit. An entity would still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
 
The FASB also proposes to remove the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment would apply to all reporting units. An entity would be required to disclose the existence of any reporting units with zero or negative carrying amounts and the amount of goodwill allocated to those reporting units.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.