We are pleased to release MaloneBailey's September 2020 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

  • FASB Improves Convertible Instruments and Contracts in an Entity's Own Equity

COVID-19 Related Updates

  •  COVID-19 – AICPA Publishes COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports
  • State and Local Governments – AICPA Publishes FAQs on State and Local Government Accounting and Auditing Issues Related to COVID-19
  • COVID-19 – AICPA Publishes COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports
  • Audit Committees – PCAOB Publishes Staff Guidance on Conversations with Audit Committee Chairs Related to COVID-19
  • State and Local Governments – AICPA Publishes FAQs on State and Local Government 
  • Confidential Treatment – Corp Fin Provides Guidance on Rule 83 Confidential Treatment Requests

Recent Accounting & Regulatory Updates

Recent FASB & AICPA Updates

  • FASB Accounting Standards Updates - No. 2020-06 —Debt —Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity 's Own Equity (Subtopic 815-40) —Accounting for Convertible Instruments and Contracts in an Entity 's Own 
  • FASB Accounting Standards Updates - No. 2020-05 —Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) —Effective Dates for Certain Entities 
  • Exposure Draft - Proposed Accounting Standards Update 2020-400 —Financial Services —Insurance (Topic 944): Effective Date and Early Application 
  • Revenue Recognition – FASB Discusses Practical Expedient for Private Company Franchisors
  • Financial Reporting Model – GASB Issues Exposure Draft on Financial Reporting Model Improvements
  • Accounting and Review Services – Accounting and Review Services Committee Meeting Highlights Published
  •  Insurance – FASB Proposes to Delay Long-Duration Insurance Standard
  • Accounting Estimates – AICPA Releases Updated Standard on Auditing Accounting Estimates
  • Digital Assets – AICPA Updates Practice Aid on Accounting for and Auditing of Digital Assets
  • FASB Agenda – FASB Discusses Agenda Prioritization

Recent SEC & PCAOB Updates

  • Release No. 34-89394: Covered Broker-Dealer Provisions under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
  • Release No. 34-89372: Exemptions from the Proxy Rules for Proxy Voting Advice 
  • Broker-Dealers – SEC Adopts Rule on the Orderly Liquidation of Covered Broker-Dealers under Title II of the Dodd-Frank Act
  • SEC Enforcement – SEC Commissioner Peirce Discusses Views on Recent SEC Enforcement Case
  • Investment Managers 

Tax Updates

  • Working from Home – Home Office Deduction

Extra Crunch

  • On the Air: Accounting Today Podcasts

About MaloneBailey, LLP

Featured Podcast
FASB Improves Convertible Instruments and Contracts in an Entity's Own Equity

Summary - In this episode of “Everybody Counts”, Caroline Rosen, Marketing and Communications Manager and Yuki Hua, Audit Manager discuss FASB's improvements to convertible instruments and contracts in an entity's own equity including details about the update, what it will change and who it will effect.

For this podcast and many more, please visit the Resources section of the MaloneBailey website.
COVID-19 Related Updates
COVID-19 AICPA Publishes COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports

Summary - The AICPA has published a COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports. This tools reviews deadline extensions for various federal agency reporting due dates that have been extended in light of COVID-19.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
State and Local Governments – AICPA Publishes FAQs on State and Local Government Accounting and Auditing Issues Related to COVID-19

Summary - As reported above, the AICPA has published the staff document, FAQs – State and Local Government Financial Statement Accounting and Auditing Matters and Auditor Reporting Issues Related to COVID-19.

The AICPA released this FAQ for use by practitioners performing financial statement and audit engagements of state and local governments and preparers of such financial statements during the COVID-19 pandemic.

This nonauthoritative guidance covers accounting and audit matters, including the following topics, among others:

  • Subsequent events as defined in GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards;
  • Management’s discussion and analysis, including financial reporting considerations related to the pandemic using GASB Statement No. 34, Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments and what auditors should keep in mind as it relates to MD&A related to the pandemic;
  • Going concern matters;
  • Loss contingencies and claims and judgments;
  • Noncompliance with finance-related legal or contractual provisions;
  • Fair value of investments;
  • Capital asset impairment considerations;
  • Termination benefits;
  • Extraordinary and special items;
  • Operating versus nonoperating for proprietary funds;
  • Tax revenue – delayed due dates;
  • Pension and OPEB valuation;
  • Audit-specific and auditor-reporting specific matters;
  • Planned meetings;
  • Fraud inquiries;
  • Risk assessment; and
  • Internal control over financial reporting.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
COVID-19 AICPA Publishes COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports

Summary - As reported above, the AICPA has published a COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports. This tools reviews deadline extensions for various federal agency reporting due dates that have been extended in light of COVID-19.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Audit Committees PCAOB Publishes Staff Guidance on Conversations with Audit Committee Chairs Related to COVID-19

Summary - The PCAOB has published Staff Guidance: PCAOB Conversations with Audit Committee Chairs - COVID-19 and the Audit. As part of its ongoing outreach efforts, the PCAOB has held conversations with audit committee chairs on the ongoing COVID-19 pandemic. Given the unprecedented challenges for auditors, audit committees, and issuers created by the COVID-19 pandemic, the PCAOB asked audit committee chairs how they are thinking about the effect of COVID-19 on financial reporting and the audit as they perform their oversight duties.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
State and Local Governments AICPA Publishes FAQs on State and Local Government Accounting and Auditing Issues Related to COVID-19 

Summary - The AICPA has published the staff document, FAQs State and Local Government Financial Statement Accounting and Auditing Matters and Auditor Reporting Issues Related to COVID-19.

The AICPA released this FAQ for use by practitioners performing financial statement and audit engagements of state and local governments and preparers of such financial statements during the COVID-19 pandemic.

This nonauthoritative guidance covers accounting and audit matters, including the following topics, among others:

  • Subsequent events as defined in GASB Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards;
  • Managements discussion and analysis, including financial reporting considerations related to the pandemic using GASB Statement No. 34, Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments and what auditors should keep in mind as it relates to MD&A related to the pandemic;
  • Going concern matters;
  • Loss contingencies and claims and judgments;
  • Noncompliance with finance-related legal or contractual provisions;
  • Fair value of investments;
  • Capital asset impairment considerations;
  • Termination benefits;
  • Extraordinary and special items;
  • Operating versus nonoperating for proprietary funds;
  • Tax revenue delayed due dates;
  • Pension and OPEB valuation;
  • Audit-specific and auditor-reporting specific matters;
  • Risk assessment; and
  • Internal control over financial reporting.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Confidential Treatment Corp Fin Provides Guidance on Rule 83 Confidential Treatment Requests

Summary - The SECs Division of Corporation Finance (Corp Fin) has published guidance Regarding Submission of Supplemental Materials and Information Subject to Rule 83 Confidential Treatment Requests in Light of COVID-19 Concerns. In light of ongoing health and safety concerns related to COVID-19, Corp Fin is providing a temporary secure file transfer process for the submission of supplemental materials pursuant to Securities Act Rule 418 and Exchange Act Rule 12b-4 and information subject to Rule 83 confidential treatment requests.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Recent FASB & AICPA Updates
FASB Accounting Standards Updates - No. 2020-06 —Debt —Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity 's Own Equity (Subtopic 815-40) —Accounting for Convertible Instruments and Contracts in an Entity 's Own Equity

Summary - The FASB issued Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-05 is expected to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity.

The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

The ASU is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption will be permitted.

In its original July 2019 Exposure Draft, the FASB also proposed simplifying the accounting for equity contracts by reducing form-over-substance-based accounting conclusions that are driven by remote contingent events in the assessment of the derivatives scope exception. However, based on mixed feedback from stakeholders during the public comment period, the FASB decided not to include those proposed changes in the ASU. Consequently, the FASB plans to continue to explore improvements on this aspect of the guidance in a separate Phase 2 project. 

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Accounting Standards Updates - No. 2020-05 —Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) —Effective Dates for Certain Entities

Summary - The FASB issued an Accounting Standards Update (ASU) that grants a one-year effective date delay for certain companies and organizations applying the revenue recognition and leases guidance. Early application continues to be permitted.

The ASU permits private companies and not-for-profit organizations that have not yet applied the revenue recognition standard to do so for annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020.

For leases, the ASU provides an effective date deferral to private companies, private not-for-profit organizations, and public not-for-profit organizations that have not yet issued (or made available) their financial statements reflecting the adoption of the guidance. It is intended to provide near-term relief for certain entities for whom the leases adoption is imminent.

Under the ASU, private companies and private not-for-profit organizations may apply the new leases standard for fiscal years beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022. Public not-for-profit organizations that have not yet issued (or made available to issue) financial statements reflecting the adoption of the leases guidance may apply the standard for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Exposure Draft - Proposed Accounting Standards Update 2020-400 —Financial Services —Insurance (Topic 944): Effective Date and Early Application

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would help insurance companies adversely affected by the COVID-19 pandemic by giving them an additional year to implement ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). However, for insurers that may not need the extra time, the proposal would make it easier and cost-effective to maintain their current timelines and early adopt LDTI. Stakeholders are asked to review and provide comment on the proposed ASU by August 24, 2020.

To facilitate early application and encourage accelerated delivery of better information to investors, the proposed ASU would allow insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.

The proposed ASU would permit insurance companies to delay implementation by one year as follows:

  • For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI would be effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
  • For all other entities, LDTI would be effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Revenue Recognition – FASB Discusses Practical Expedient for Private Company Franchisors

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on July 22, 2020, and discussed an implementation issue in the franchisor industry related to Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).

The FASB decided to:

  • Add a project to its technical agenda to reduce the implementation costs related to applying Topic 606 to initial franchise fees for franchisors that are not public business entities.
  • Include the practical expedient for applying Topic 606 to initial franchise fees for franchisors that are not public business entities within Topic 952, Franchisors.
  • Require an entity that elects the practical expedient to disclose that fact.
  • Include implementation guidance by providing separate examples that illustrate the application of Topic 606 for franchisors that are not public business entities that: (a) do not elect the practical expedient; and (b) elect the practical expedient.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Financial Reporting Model – GASB Issues Exposure Draft on Financial Reporting Model Improvements

Summary - The GASB has issued an Exposure Draft of a proposed Statement, Financial Reporting Model Improvements. The comment due date is February 26, 2021.

The GASB expects the proposal, if adopted as proposed, to improve to key components of the blueprint for state and local government annual financial reports. The Exposure Draft includes proposals to improve the effectiveness of financial reports in providing information essential for making decisions and assess government’s accountability and addressing certain application issues.

The proposals would establish or modify existing accounting and financial reporting requirements related to:

  • Application of the short-term financial resources measurement focus and accrual basis of accounting in governmental funds (replacing the existing current financial resources measurement focus and modified accrual basis of accounting);
  • Management’s discussion and analysis;
  • Presentation of governmental fund financial statements;
  • Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position;
  • Unusual or infrequent items; and
  • Budgetary comparison information.

The GASB indicates that the proposed changes would improve financial reporting in a variety of ways. For example, the proposed short-term financial resources measurement focus and accrual basis of accounting would improve the consistency of the information in governmental fund financial statements. The proposed changes to the presentation of governmental fund financial statements would (1) make the short-term nature of their information more evident and understandable, and (2) more clearly differentiate them from the long-term perspective of the government-wide financial statements.

The GASB plans to hold a series of public hearings and user forums on the Exposure Draft to further enable stakeholders to share their views. These public hearings are tentatively scheduled for March and April 2021. The Exposure Draft includes more information about commenting on the Exposure Draft and participating in the public hearings and users’ forums.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Accounting and Review Services Accounting and Review Services Committee Meeting Highlights Published

Summary - The AICPAs Accounting and Review Services (ARSC) Committee has published highlights from its June 11, 2020 meeting.

Topics discussed included:

  • Communications with predecessor auditors; and
  • Open discussion on issues related to SSARs engagements.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Insurance – FASB Proposes to Delay Long-Duration Insurance Standard

Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would help insurance companies adversely affected by the COVID-19 pandemic by giving them an additional year to implement ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). However, for insurers that may not need the extra time, the proposal would make it easier and cost-effective to maintain their current timelines and early adopt LDTI. Stakeholders are asked to review and provide comment on the proposed ASU by August 24, 2020.

To facilitate early application and encourage accelerated delivery of better information to investors, the proposed ASU would allow insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.

The proposed ASU would permit insurance companies to delay implementation by one year as follows:

  • For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI would be effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
  • For all other entities, LDTI would be effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Accounting Estimates AICPA Releases Updated Standard on Auditing Accounting Estimates

Summary - The Auditing Standards Board (ASB) of the AICPA has issued the new standard, Statement on Auditing Standards No. (SAS) 143, Auditing Accounting Estimates and Related Disclosures. SAS 143 supersedes SAS No. 122 Section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures, and amends various other AU-C Sections in AICPA Professional Standards.

This new auditing standard provides more robust guidance for auditors who are addressing an increasingly complex financial reporting environment, said Bob Dohrer, CPA, CGMA, AICPA Chief Auditor. In our current period of economic uncertainty and volatility, managements asset impairment estimates are particularly important, and this standard will aid auditors in assessing them.

What SAS 143 Does
New SAS 143 is one piece of a larger AICPA project to enhance audit quality (see the AICPAs Enhancing Audit Quality Initiative). It enables auditors to address todays new accounting standards and to enhance the auditors focus on factors driving estimation uncertainty and potential management bias.

Among the noteworthy changes, SAS 143 requires inherent risk and control risk to be assessed separately for accounting estimates.

SAS 143 addresses the auditors responsibilities relating to accounting estimates in an audit of financial statements. These include fair value accounting estimates and related disclosures. In the introduction, SAS 143 notes that in auditing accounting estimates, the auditor is responsible for obtaining sufficient appropriate audit evidence about whether the accounting estimates and related disclosures in the financial statements are reasonable, in the context of the applicable financial reporting framework.

The ASB has issued additional documents to assist practitioners in implementing the new standard, including:

  • SAS No. 143 At a Glance, Auditing Accounting Estimates and Related Disclosures; and
  • Linkages Between SAS No. 143, Auditing Accounting Estimates and Related Disclosures (AU-C Section 540), and Other AU-C Sections.

Effective Date
SAS 143 will be effective for audits of financial statements for periods ending on or after December 15, 2023.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Digital Assets AICPA Updates Practice Aid on Accounting for and Auditing of Digital Assets

Summary - The AICPA has updated its Practice Aid, Accounting for and Auditing of Digital Assets, to include new material on how to audit digital assets, with the focus on Client Acceptance and Continuance.

The Practice Aid, originally issued in December 2019, provides nonauthoritative guidance for financial statement preparers and auditors on accounting for and auditing digital assets under GAAP and GAAS. The new material is complementary to the accounting guidance previously issued in December. The new guidance is based on professional literature and experience from members of the AICPA Digital Assets Working Group (DAWG) and AICPA staff, and is specific to GAAS.

For purposes of applying the guidance, digital assets are defined broadly to include digital records, made using cryptography for verification and security purposes, on a distributed ledger (i.e., blockchain). Although all industries encounter change, the digital assets ecosystem is evolving rapidly. As firms seek to provide audits to entities within the ecosystem, they must give caution and consideration to unique risks and challenges.

The updated Practice Aid provides auditors with detailed information to consider when accepting or continuing audit engagements that involve digital assets. CPA firms seeking to provide audits to entities involved with digital assets need to ensure that they undertake only audit engagements that are appropriate. This requires evaluation of whether the audits can be performed in accordance with professional standards and applicable legal and regulatory requirements to enable an appropriate auditors report. The updated Practice Aid provides guidance to enable that evaluation.

Before accepting or continuing an engagement, firms need to assess items including:

  • The auditor skill sets and competencies, including the firms current industry expertise and understanding of digital assets;
  • Managements skill sets and competencies, including with respect to maintaining the entitys books and records and securing its assets; and
  • Client managements integrity, commitment to compliance with laws and regulations, and its overall business strategy and the role the entity serves or intends to serve within the digital assets ecosystem.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
FASB Agenda FASB Discusses Agenda Prioritization

Summary - As reported in its Summary of Board Decisions publication, the FASB met on July 29, 2020, and discussed the results of staff research and outreach on eight potential projects related to recent agenda requests and other implementation requests.

The FASB decided to add a targeted improvements project for Topic 842, Leases, to its technical agenda to address the following issues:

  • Sales-type leases with substantial variable lease payments
  • Remeasurement of lease payments based on a reference index or rate
  • Reduction of scope in a lease contract.

The FASB decided not to consider the issue on transition disclosures under Topic 842 as part of that project. The FASB decided to add a project to its technical agenda to address the effect of underwriter restrictions on fair value measurements and to add a project to its research agenda to evaluate the effects of other types of sale restrictions on fair value measurements.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Recent SEC & PCAOB Updates
Release No. 34-89394: Covered Broker-Dealer Provisions under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act

Summary - The SEC and the Federal Deposit Insurance Corporation have adopted a final rule required by the Dodd-Frank Act clarifying and implementing provisions relating to the orderly liquidation of certain brokers or dealers (covered broker-dealers) in the event the FDIC is appointed receiver under Title II of the Dodd-Frank Act. The FDIC and SEC developed the final rule in consultation with the Securities Investor Protection Corporation (SIPC).

The SEC indicates that by statute, “the orderly liquidation of a covered broker-dealer must be accomplished in a manner that ensures that customers of the covered broker-dealer receive payments or property at least as beneficial to them as would have been the case had the covered broker-dealer been liquidated under the Securities Investor Protection Act of 1970 (SIPA).”

Among other things, the final rule clarifies how the relevant provisions of SIPA would be incorporated into a Title II proceeding. Upon the appointment of the FDIC as receiver, the FDIC would appoint SIPC to act as trustee for the broker-dealer. SIPC, as trustee, would determine and satisfy customer claims in the same manner as it would in a proceeding under SIPA. The treatment of the covered broker-dealer’s qualified financial contracts would be governed in accordance with Title II.
In addition, the final rule describes the claims process applicable to customers and other creditors of a covered broker-dealer and clarifies the FDIC’s powers as receiver with respect to the transfer of assets of a covered broker-dealer to a bridge broker-dealer.

The final rule is substantively identical to the proposed rule previously published in the Federal Register. It will be effective 60 days after publication in the Federal Register.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Release No. 34-89372: Exemptions from the Proxy Rules for Proxy Voting Advice

Summary - The SEC adopted amendments to its rules governing proxy solicitations designed to ensure that clients of proxy voting advice businesses have reasonable and timely access to more transparent, accurate and complete information on which to make voting decisions. According to the SEC, the amendments “aim to facilitate the ability of those who use proxy voting advice—investors and others who vote on investors’ behalf—to make informed voting decisions without imposing undue costs or delays that could adversely affect the timely provision of proxy voting advice.”

The amendments condition the availability of two exemptions from certain of the federal proxy rules often used by proxy voting advice businesses on compliance with tailored and comprehensive conflicts of interest disclosure requirements.

The exemptions are also conditioned on two principles-based requirements designed to ensure that:

  • Registrants that are the subject of proxy voting advice have such advice made available to them in a timely manner; and
  • Clients of proxy voting advice businesses are provided with an efficient and timely means of becoming aware of any written responses by registrants to proxy voting advice.

The SEC indicates that these conditions reflect certain observed market practices and are intended to ensure that proxy voting advice clients have access to information that is more transparent, accurate and complete.

In addition, the amendments codify the SEC’s longstanding view that proxy voting advice generally constitutes a solicitation under the proxy rules and makes clear that the failure to disclose material information about proxy voting advice may constitute a potential violation of the antifraud provision of the proxy rules.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Broker-Dealers SEC Adopts Rule on the Orderly Liquidation of Covered Broker-Dealers under Title II of the Dodd-Frank Act

Summary - The SEC and the Federal Deposit Insurance Corporation have adopted a final rule required by the Dodd-Frank Act clarifying and implementing provisions relating to the orderly liquidation of certain brokers or dealers (covered broker-dealers) in the event the FDIC is appointed receiver under Title II of the Dodd-Frank Act. The FDIC and SEC developed the final rule in consultation with the Securities Investor Protection Corporation (SIPC).

The SEC indicates that by statute, the orderly liquidation of a covered broker-dealer must be accomplished in a manner that ensures that customers of the covered broker-dealer receive payments or property at least as beneficial to them as would have been the case had the covered broker-dealer been liquidated under the Securities Investor Protection Act of 1970 (SIPA).

Among other things, the final rule clarifies how the relevant provisions of SIPA would be incorporated into a Title II proceeding. Upon the appointment of the FDIC as receiver, the FDIC would appoint SIPC to act as trustee for the broker-dealer. SIPC, as trustee, would determine and satisfy customer claims in the same manner as it would in a proceeding under SIPA. The treatment of the covered broker-dealers qualified financial contracts would be governed in accordance with Title II.

In addition, the final rule describes the claims process applicable to customers and other creditors of a covered broker-dealer and clarifies the FDICs powers as receiver with respect to the transfer of assets of a covered broker-dealer to a bridge broker-dealer.

The final rule is substantively identical to the proposed rule previously published in the Federal Register. It will be effective 60 days after publication in the Federal Register.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC Enforcement SEC Commissioner Peirce Discusses Views on Recent SEC Enforcement Case

Summary - SEC Commissioner Hester M. Peirce recently discussed an SEC Enforcement case that involved digital assets. Peirce indicated that innovation in the digital asset industry has and will continue to challenge us as securities regulators. I would prefer that we not only hold accountable the reckless innovators who skate among mirrors while playing the violin, but also attempt to provide the more cautious innovators some guidance on how to avoid the hall of mirrors and on what we consider to be adequate braking technology. I look forward to working with my colleagues to ensure that we do so in a consistent and transparent manner.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Investment Managers 

Summary - The SEC announced that it has proposed to amend Form 13F to update the reporting threshold for institutional investment managers and make other targeted changes. The threshold has not been adjusted since the SEC adopted Form 13F over 40 years ago.

The SEC indicates that Form 13F was adopted pursuant to a 1975 statutory directive designed to provide the Commission with data from larger managers about their investment activities and holdings, so that their influence and impact could be considered in maintaining fair and orderly securities markets.

The proposal would raise the reporting threshold to $3.5 billion, reflecting proportionally the same market value of U.S. equities that $100 million represented in 1975, the time of the statutory directive. The new threshold would retain disclosure of over 90% of the dollar value of the holdings data currently reported while eliminating the Form 13F filing requirement and its attendant costs for the nearly 90% of filers that are smaller managers. In addition, since the initial 13F thresholds were established in 1978, the SEC has added other data collection tools, including N-PORT.

The proposal includes an analysis of alternate approaches to adjusting the reporting threshold, including the use of consumer price inflation and stock market returns; the increase in Form 13F filers over the past four decades; and the increase in the overall size of the U.S. equities market over time. Under the proposed amendments, the aggregate value of section 13(f) securities reported by managers would represent approximately 75% of the U.S. equities market as a whole, as compared with 40% in 1981, the earliest year for which Form 13F data is available.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Tax Updates
Working from Home – Home Office Deduction
Authored by Tabitha Ford, Tax Senior, MaloneBailey, LLP.

Summary – With businesses operating remotely, more taxpayers may be eligible to claim a home office deduction. The home office deduction allows qualifying taxpayers to deduct certain expenses related to the space in their home designated specifically to perform activities for their trade or business. Considerations should be made currently, in order to take the home office deduction for the 2020 tax return, such as expense tracking techniques and requirements.

Those qualified to take the deduction:

  • Sole-proprietors filing a Schedule C
  • Farmers filing a Schedule F
  • Partners of a partnership (deducted as unreimbursed partnership expenses on Schedule E)
  • Employees can not take the home office deduction.

S-Corp Shareholders – Deduction can be taken on the S-Corporation tax return in the following situation only:

  • The S-corp creates a formal reimbursement arrangement (called an “accountable plan”) to pay employees for their business expenses including the expenses of setting up and operating a home office.
  • Employees then regularly request reimbursement for those expenses, including the home office expenses
  • The S-corp pays those business expenses, carefully applying the rules of the “accountable plan” reimbursement arrangement.

You must use part of your home as one of the following:

  • Exclusively and regularly as your principal place of business for your trade or business;
  • Principle place of business to mean where most of the business activities are performed, including where you conduct substantial administrative or management activities for that trade or business.
  • Exclusively and regularly as a place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business;
  • A separate structure that's not attached to your home used exclusively and regularly in connection with your trade or business;
  • On a regular basis for storage of inventory or product samples used in your trade or business of selling products at retail or wholesale;
  • For rental use; or
  • As a daycare facility.

Allowable Expenses:

  • Mortgage Interest
  • Insurance
  • Utilities
  • Repairs
  • Maintenance
  • Depreciation
  • Rent guidance

If you have questions or would like guidance on setting up an accountable plan, please feel free to contact our Senior Tax Manager, Nicole Zhao
 
For more information on the home office deduction, click here.
Extra Crunch
On the Air: Accounting Today Podcasts

Summary - Accounting Today offers a library of podcasts covering important topics in the accounting community. These podcasts cover in-depth discussions on the latest accounting issues between some of the industry's top leaders.

Podcasts in Accounting Today's library cover a wide range of issues including both technical and non-technical issues. Recordings are released weekly and offer a great resource to those trying to keep up with what's going on in the industry.

For more information, please click here.
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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