We are pleased to release MaloneBailey's September 2022 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

www.malonebailey.com

What's the Crunch?



Featured Podcast


  • Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring Nicole Zhao


Recent Accounting & Regulatory Updates



Recent FASB & AICPA Updates


  • Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts
  • Investment in Tax Credit Structures –FASB Ratifies Consensus-for-Exposure 
  • Conceptual Framework –FASB Discusses Conceptual Framework 
  • Segment Reporting –FASB Discusses Segment Reporting
  • Government Auditing Standards and Single Audits –New Edition of AICPA Audit and Accounting Guide Published
  • Health Care Entities –New Edition of AICPA Audit and Accounting Guide Published 
  • Not-for-Profit Entities –New Edition of AICPA Audit and Accounting Guide Published
  • Professional Standards –GAO Issues Professional Standards Update No. 85



Recent SEC & PCAOB Updates


  • Release No. 34-95267: Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8
  • Release No.34-95266: Proxy Voting Advice


Tax


  • IRS Mileage Rate Increased for Final 6 Months in 2022


Extra Crunch


  • NYSE’s Inside the ICE House


About MaloneBailey, LLP


Featured Podcast

Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring

Nicole Zhao


Summary - Harris Bricken is an international law firm with locations in Los Angeles, Portland, San Francisco, Seattle, Barcelona and Beijing. The firm's podcast, Global Law and Business, is hosted by international attorneys Fred Rocafort and Jonathan Bench.


Nicole Zhao, Tax Partner at MaloneBailey, is featured in Episode 49. In this episode, Nicole discusses international tax and audit, tax issues for foreign companies looking to establish a presence in U.S., advice for businesses that struggled last year, and much more. Episode 49 and all others are available on the Harris Bricken website. Please click here.


For more information about Harris Bricken, please click here.


Recent FASB & AICPA Updates

Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts


Summary - The FASB issued proposed Accounting Standards Update (ASU), Financial Services—Insurance (Topic 944): Transition for Sold Contracts. Comments on the proposed standard are due by August 8, 2022.


The amendments in ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), require an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application is elected. The FASB received stakeholder feedback indicating that applying the LDTI guidance to contracts that were derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date likely would not provide decision-useful information to investors and other financial statement users and may result in significant operability challenges for insurance entities to apply the guidance.


As such, the FASB is issuing this proposed ASU to attempt to reduce implementation costs and complexity associated with the adoption of LDTI for contracts that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date. Otherwise, an insurance entity would be required to reclassify a portion of the previously recognized gains or losses to the LDTI transition adjustment because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, such a reclassification could be misleading to financial statement users.


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Investment in Tax Credit Structures – FASB Ratifies Consensus-for-Exposure


Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on July 13, 2022, and ratified the consensus-for-exposure EITF 21-A, “Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” The FASB directed its staff to draft a proposed Accounting Standards Update (ASU) reflecting the consensus-for-exposure for vote by written ballot. 


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Conceptual Framework – FASB Discusses Conceptual Framework


Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on July 20, 2022, and discussed whether to begin initial deliberations on the recognition and derecognition phase of the Conceptual Framework project. The FASB deliberated substantive issues that were identified by staff related to recognition and derecognition concepts in FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, as amended by Chapter 7, Presentation, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting. The FASB discussed the comment period for proposed Chapter 2, The Reporting Entity, and proposed Chapter 5, Recognition and Derecognition, of Concepts Statement 8. Among other things, the FASB decided to begin initial deliberations on the recognition and derecognition phase of the Conceptual Framework project. 

 

For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Segment Reporting – FASB Discusses Segment Reporting


Summary As reported in its “Summary of Board Decisions” publication, the FASB met on July 27, 2022, and discussed feedback from the external review of the staff draft of the proposed ASU. The FASB also discussed two potential disclosures and a sweep issue that was identified from the external review of the staff draft. Among other things, the FASB decided to require that a public entity disclose the title and position of its CODM.


The FASB had previously decided to require that a public entity disclose segment expenses under a significant expense principle. At this meeting, the FASB decided that a public entity should disclose the nature of the expense information that the CODM uses to manage operations if the entity does not disclose significant expense categories and amounts under the significant expense principle for one or more of its reportable segments. 


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Government Auditing Standards and Single Audits – New Edition of AICPA Audit and Accounting Guide Published


Summary The AICPA has published a new edition of its Audit and Accounting Guide, Government Auditing Standards and Single Audits. This guide addresses the auditor's responsibilities when conducting an audit of financial statements in accordance with Government Auditing Standards and provides guidance on the auditor's responsibilities when conducting a single audit or program-specific audit in according with the Single Audit Act and the Uniform Guidance.


This edition also includes a new Disclaimer of Opinion on Compliance report. Additionally, “COVID-19 Considerations” boxes have been placed throughout the chapters in this guide in order to alert you to pandemic related considerations. 


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Health Care Entities –New Edition of AICPA Audit and Accounting Guide Published


Summary The AICPA has published a new edition of its Audit and Accounting Guide, Health Care Entities. This guide has been developed by the AICPA Health Care Expert Panel and the AICPA Health Care Audit and Accounting Guide Overhaul Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).


This edition of the guide has been revised by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued, and other revisions as deemed appropriate. Relevant guidance issued through September 1, 2021, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, regulatory, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance. 


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Not-for-Profit Entities – New Edition of AICPA Audit and Accounting Guide Published


Summary The AICPA has published a new edition of its Audit and Accounting Guide, Not-for-Profit Entities. This guide has been developed by the AICPA Not-for-Profit Entities Expert Panel and Guide Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management of not-for-profit entities (NFPs) in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).


This edition of the guide has been modified by AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued (March 1, 2013, edition) and other revisions as deemed appropriate. Relevant guidance issued through March 1, 2022, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, regulatory, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance. 


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Professional Standards – GAO Issues Professional Standards Update No. 85


Summary The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 85 covering standards published from April through June 2022. PSUs highlight the effective dates and issuance of recent standards and guidance related to engagements conducted in accordance with Government Auditing Standards. They provide brief summaries of recently issued standards of major auditing and accounting standard setting bodies, including, among others, the GAO, the FASB, GASB, and AICPA. Auditors may use the GAO’s Governmental Auditing Standards: 2018 Revision Technical Update April 2021 (Yellow Book) in connection with professional standards issued by the GAO and other authoritative bodies.


PSUs inform Yellow Book users of important changes to professional requirements and highlight key points of recent standards. They do not establish new professional standards, reflect GAO official views on these requirements, nor provide a complete summary of the standards. Users should refer to the original, authoritative standards for details on those standards and for purposes of implementing them.  


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recent SEC & Regulatory Updates

Release No. 34-95267: Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange Act Rule 14a-8



Summary - The SEC has proposed for public comment amendments to the rule that governs the process for including shareholder proposals in a company’s proxy statement. The SEC indicates that under Rule 14a-8, “companies generally must include shareholder proposals in their proxy statements. The rule, however, provides several bases for exclusion, including several substantive requirements that proposals must comply with to avoid exclusion. The proposed amendments would revise three of the bases for exclusion to promote more consistency and predictability in application.”


The proposed amendments to Rule 14a-8 would revise the following bases for exclusion:

  • Substantial Implementation. The proposed amendments would specify that a proposal may be excluded under this provision if the company has already implemented the “essential elements” of the proposal.
  • Duplication. The proposed amendments would specify that a proposal “substantially duplicates” another proposal previously submitted for the same shareholder meeting if it addresses the same subject matter and seeks the same objective by the same means.
  • Resubmission. The proposed amendments would provide that a proposal constitutes a resubmission if it substantially duplicates another proposal that was previously submitted for the same company’s prior shareholder meetings.


The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 34-95266: Proxy Voting Advice


Summary - The SEC adopted amendments to its rules governing proxy voting advice that aims “to avoid burdens on proxy voting advice businesses that may impair the timeliness and independence of their advice. The amendments also address misperceptions about liability standards applicable to proxy voting advice while also preserving investors’ confidence in the integrity of such advice.”


The final amendments rescind two rules applicable to proxy voting advice businesses that the SEC adopted in 2020. Specifically, the final amendments rescind conditions to the availability of two exemptions from the proxy rules’ information and filing requirements on which proxy voting advice businesses often rely.


Those conditions require 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 a means of becoming aware of any written responses by registrants to proxy voting advice.


The SEC indicates that institutional investors and other clients of proxy voting advice businesses have continued to express concerns that these conditions could impose increased compliance costs on proxy voting advice businesses and impair the independence and timeliness of their proxy voting advice.

The final amendments also delete the 2020 changes made to the proxy rules’ liability provision. Although the 2020 changes were intended to clarify the application of this liability provision to proxy voting advice, they instead created a risk of confusion regarding the application of this provision to proxy voting advice, undermining the goal of the 2020 changes. The final amendments address the confusion while affirming that proxy voting advice generally is subject to liability under the proxy rules.

Finally, the adopting release rescinds guidance that the SEC issued in 2020 to investment advisers regarding their proxy voting obligations.


The final amendments and rescission of the guidance will become effective 60 days after publication in the Federal Register.


For more information, click here.


© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Tax Updates

IRS Mileage Rate Increased for Final 6 Months in 2022


Summary - For years the IRS has allowed taxpayers to deduct the costs of operating motor vehicles they own or lease for business purposes. An alternative to deducting the actual costs incurred for the use of an automobile is to compute a deduction using the standard mileage rate. The IRS provides standard business mileage rates for each calendar year and will occasionally modify them during the year if gas prices are especially volatile.


What led to the increase?

In June 2022 the IRS announced an increase in the standard mileage rate for the final 6 months of 2022. For the last half of the year in 2022 the standard mileage rate for business travel will be 62.5 cents per mile. This is an increase of 4 cents from the effective rate to start the tax year. Normally the mileage rates are updated in the fall for the next calendar year. With that said, the last time the IRS made a midyear increase to the mileage rates was in 2011. However, due to the rise in fuel prices this year the IRS has decided to make this special adjustment.


Important Factors Considered

While fuel costs are a significant factor in determining mileage rates, there are other factors that are figured into the calculation as well. These other factors typically include depreciation, insurance, and other fixed and variable costs. In practice, a high mileage individual generally benefits more using the standard mileage method than under the actual cost method, especially if the taxpayer drives a fuel-efficient automobile.



Recordkeeping

Many taxpayers use the business standard mileage rate to help simplify record keeping. If instead of using the standard mileage rate you use the actual expense method to calculate your vehicle deduction for business miles driven, you must maintain very careful records. You must keep track of the actual costs during the year to calculate your deductible vehicle expenses. On the other hand, if you use the standard mileage rate to determine your deduction the one tool that can be very useful is a mileage logbook. Since the mileage rate changed during the year, taxpayers should keep their mileage from January 1st to June 30th separate from the miles recorded during July 1st through December 31st.


If you have any additional question, please feel free to contact Nicole Zhao, Tax Partner, at nzhao@malonebailey.com.

Extra Crunch

NYSE’s Inside the ICE House


The New York Stock Exchange (NYSE) offers a podcast that features "conversations with leaders, entrepreneurs, and visionaries. Inside the ICE House, a podcast produced by Intercontinental Exchange, takes listeners behind the historic façade of the New York Stock Exchange and inside the global financial marketplace," according to the website.


Furthermore, the website explains, that "the episodes, recorded in the Library of the NYSE, feature conversations with leaders, entrepreneurs and visionaries who walk through our doors with a dream of building businesses and changing the world."


To access the library of podcast episodes, please click here.

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