We are pleased to release MaloneBailey's September 2018 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.  We invite you to visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.

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             Recent FASB Updates & Proposals
Leases (Topic 842): Targeted Improvements - FASB ASU No. 2018-11  FASB01

Summary The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases ( Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers.
 
"The targeted improvements in the ASU address areas our stakeholders  identified as sources of unnecessary cost or complexity in the leases standard," stated FASB Chairman Russell G. Golden.  "They represent the FASB's commitment to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard without compromising the quality of information provided to investors."

ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Codification Improvements to Topics 842, Leases - FASB ASU No. 2018-10  FASB02

Summary The FASB has issued Accounting Standards Update (ASU) No. 2018-10, Codification Improvements to Topic 842, Leases.

ASU No. 2018-10, among other things, amends Topic 842 as follows:
  • Issue 1: Residual Value Guarantees - Paragraph 460-10-60-32 in Topic 460, Guarantees
  • Issue 2: Rate Implicit in the Lease
  • Issue 3: Lessee Reassessment of Lease Classification 
  • Issue 4: Lessor Reassessment of Lease Term and Purchase Option 
  • Issue 5: Variable Lease Payments That Depend on an Index or a Rate 
  • Issue 6: Investment Tax Credits 
  • Issue 7: Lease Term and Purchase Option
  • Issue 8: Transition Guidance for Amounts Previously Recognized in Business Combinations 
  • Issue 9: Certain Transition Adjustments
  • Issue 10: Transition Guidance for Leases Previously Classified as Capital Leases under Topic 840
  • Issue 11: Transition Guidance for Modifications to Leases Previously Classified as Direct Financing or Sales-Type Leases under Topic 840 
  • Issue 12: Transition Guidance for Sale and Leaseback Transactions 
  • Issue 13: Impairment of Net Investment in the Lease
  • Issue 14: Unguaranteed Residual Asset 
  • Issue 15: Effect of Initial Direct Costs on Rate Implicit in the Lease
  • Issue 16: Failed Sale and Leaseback Transaction 
The amendments in ASU No. 2018-10 affect the amendments in ASU No. 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU No. 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Codification Improvements - FASB ASU No. 2018-09  FASB03

Summary The FASB has released Accounting Standards Update (ASU) No. 2018-09,  Codification  Improvements. ASU 2018-09 affects a wide variety of Topics in the Codification including:
  • Amendments to Subtopic 220-10, Income Statement- Reporting Comprehensive Income-Overall
  • Amendments to Subtopic 470-50, Debt-Modifications and Extinguishments
  • Amendments to Subtopic 480-10, Distinguishing Liabilities from Equity-Overall
  • Amendments to Subtopic 718-740, Compensation-Stock Compensation-Income Taxes
  • Amendments to Subtopic 805-740, Business Combinations- Income Taxes
  • Amendments to Subtopic 815-10, Derivatives and Hedging- Overall
  • Amendments to Subtopic 820-10, Fair Value Measurement- Overall
  • Amendments to Subtopic 940-405, Financial Services-Brokers and Dealers-Liabilities
  • Amendments to Subtopic 962-325, Plan Accounting-Defined Contribution Pension Plans-Investments-Other
The transition and effective date guidance is based on the facts and circumstances of each amendment. 

Some of the amendments in ASU No. 2018-09 do not require transition  guidance and will be effective upon issuance of ASU No. 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Leases (Topic 842): Narrow-Scope Improvements for Lessors - FASB Proposed ASU No. 2018-260  FASB04

Summary The FASB has issued a proposed accounting standards update (ASU) that would reduce costs and ease implementation of the Leases standard (ASU No. 2016-02, Leases (Topic 842))for financial statement preparers. The proposal would also clarify a specific requirement in the standard related to lessor accounting. Stakeholders are encouraged to review and provide comment on the proposal by September 12, 2018.

Specifically, this proposed ASU addresses the following issues facing lessors when applying the Leases standard:
  • Sales taxes and other similar taxes collected from lessees
  • Certain lessor costs paid directly by lessees
  • Recognition of variable payments for contracts with lease and nonlease components
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

             Recent SEC Updates & Proposals
Rule 701 - Exempt Offering Pursuant to Compensatory Arrangements - Release No. 33-10520 SEC101

Summary The SEC issued final rules to amend Securities Act Rule 701, which provides an exemption from registration for securities issued by non-reporting companies pursuant to compensatory arrangements. As mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act, the amendment increases from $5 million to $10 million the threshold in excess of which the issuer is required to deliver additional disclosures to investors.
 
This final rule is effective upon publication in the Federal Register.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Concept Release on Compensatory Securities Offerings and Sales - Release No. 33-10521  SEC102

Summary The SEC is soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the agency last substantively amended these rules in 1999.
 
The public comment period will remain open for 60 days following publication of the concept release in the Federal Register.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary The staff in the SEC's Division of Corporation Finance have published a Small Entity ComplianceGuide, Amendments to the Smaller Reporting Company Definition. The guide summarizes and explains the rules recently adopted by the SEC to amend the definition of a "Smaller Reporting Company." The new smaller reporting company definition enables a company with less than $250 million of public float to provide scaled disclosures, as compared to the $75 million threshold under the prior definition. The final rules also expand the definition to include companies with less than $100 million in annual revenues if they also have either no public float or a public float that is less than $700 million. This reflects a change from the revenue test in the prior definition, which allowed companies to provide scaled disclosure only if they had no public float and less than $50 million in annual revenues.
 
Topics discussed in this compliance guide include:
  • Summary of Amendments;
  • Qualifying as a Smaller Reporting Company;
  • Guidance on Transitioning to the Amended Smaller Reporting Company Definition;
  • Chart of Scaled Disclosure Requirements Available to Smaller Reporting Companies;
  • Amendments to Rule 3-05 of Regulation S-X; and
  • Amendments to the Accelerated Filer and Large Accelerated Filer Definitions.
For more information, click  here .

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary SEC Commissioner Hester M. Peirce recently discussed the SEC's proposed Regulation BestInterest. This proposal includes standards for broker-dealers and investment advisers providing investment assistance to investors. Proposed Regulation Best Interest requires a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer, to act in the best interest of the retail customer at the time the recommendation is made without placing the financial or other interest of the broker-dealer ahead of the interest of the retail customer.
 
In comparing the proposed Regulation Best Interest standard as well as a broker-dealer's other requirements under the securities laws to an adviser's fiduciary duty as described in the proposed interpretive release, Peirce indicated that "only two differences stand out. First, an adviser generally has an ongoing duty to monitor over the course of its relationship with its client, while a broker-dealer generally does not. Second, a broker-dealer must either mitigate or eliminate any material financial conflict of interest it may have with its client. An adviser is required only to disclose such a conflict. Rhetoric aside, arguably proposed Regulation Best Interest would subject broker-dealers to an even more stringent standard than the fiduciary standard outlined in the Commission's proposed interpretation."
 
Peirce urged those interested in the proposal to provide feedback to the SEC. Comments on the proposal were due Tuesday, August 7, 2018.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Summary The SEC proposed rule amendments to simplify and streamline the financial disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant's securities.
 
The proposed amendments to Rules 3-10 and 3-16 of Regulation S-X would focus disclosures on information that is material to investors given the specific facts and circumstances, make the disclosures easier to understand, and reduce the costs and burdens for registrants. By reducing compliance burdens, the proposed amendments should further encourage issuers to register debt offerings, and thus provide investors with additional protections that are not present in unregistered offerings.

Comments on the proposal are due 60 days from publication in the Federal Register.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

        Tax Updates
The IRS recently changed Forms W-2 and 1099-MISC reporting due dates. Before the  change, with an  automatic extension filed, these forms were due by the end of February if filed on paper, or by the end of March if filed electronically. Under the new rules, these forms are due by the end of January, and the extension request will not be approved automatically.

For the full scope of these new changes, please click here

For answers to your W-2 and 1099-MISC questions, please contact Nicole Zhao.

 
        Extra Crunch
More Companies Qualify for Scaled-Disclosure with SEC Vote EX02
 
A recent article published by the Journal of Accountancy detailed how the SEC voted in June 2018 to change the definition of "smaller reporting company" in an effort to expand the number of companies that qualify for scaled disclosure accommodations.  Click here for more information on this new definition and what companies are affected by the vote.  


FINRA Announces Initiative to Transform CRD, Other Registration Systems EX01
  
FINRA announced in June 2018 details of a multi-phased effort to  overhaul its registratio n and disclosure  programs, including the Central Registration Depository (CRD). The new technology aims to enhance efficiencies and reduce compliance costs for firms. For more information on the initiative, please click here .

Source: FINRA

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