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Visit our
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FASB updates that went into effect in 2016 as well as the
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February 2017
Greetings,
We are pleased to release MaloneBailey's February 2017 newsletter highlighting recent SEC and FASB updates and proposals. Please note that the updates provided in this newsletter are not a comprehensive list. We have selected the updates 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 related to regulatory and accounting matters.
We encourage you to visit the SEC and FASB websites for more information as well as a complete list of updated rules, regulations and proposals. We invite you to contact us should you have any questions about the information provided in this issue. You can find a list of MaloneBailey partners and their contact information at the end of this newsletter.
For easy navigation, please refer to the 'In This Issue' section, which contains a hyperlinked table of contents of rule regulation proposals and updates that may affect you. We invite you to visit our website to review archived versions of this newsletter containing past SEC and FASB updates and proposals.
The MaloneBailey Team
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In This Issue
SEC Updates & Proposals
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Summary - The SEC has issued the final rule, Adoption of Updated EDGAR Filer Manual. This final rule includes revisions to the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) Filer Manual and related rules to reflect updates to the EDGAR system. The updates are being made primarily to support the submission of Municipal Advisor submission form types in filer-constructed Extensible Markup Language (XML) format.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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 Staff Speech,
The SEC after the Financial Crisis: Protecting Investors, Preserving Markets by Mary Jo White, SEC Chair
Summary -
SEC Chair Mary Jo White recently spoke at the Economic Club of New York. Chair White discussed the importance of regulatory independence at the SEC in protecting investors and financial markets. Ms. White indicated "as we move beyond the regulatory response to the financial crisis, the SEC should continue to optimally protect investors and preserve our capital markets as fair, orderly, and efficient engines of economic growth." Highlights of Ms. White's remarks include:
- The SEC's independence is vital to serving in that leadership role and doing our job optimally. The Commission has always guarded its independence fiercely, a proud history that I have defended from my very first days as Chair.
- Like many Chairs and Commissioners before her, Chair White strongly believes that the agency's independence has been critical in allowing it to use its expert judgment to do what is best for investors and the markets - a task that could otherwise be rendered impossible by the whims of political pressure or the public mood.
- The extraordinary vitality of the American capital markets testifies to how well the Commission's independence has served investors and the economy over the years. The choices ahead for the agency will not be easy.
- Chair White's tenure has certainly been marked by hard decisions that have attracted criticism from both political parties. The SEC has been accused of both gutting regulation and suffocating the market with too much of it. Ms. White believes recent trends have even raised the question of whether or not the independence of the SEC can be preserved at all.
- Another current trend pushing against the independence of the Commission are the legislative proposals from Congress seeking to remake its rulemaking process. The House passed a bill just last week that would impose conflicting, burdensome, and needlessly detailed requirements regarding economic matters in Commission rulemaking that would provide no benefit to investors beyond the exhaustive economic analysis we already undertake.
It will also be up to others, including Congress, to offer an unwavering defense, not of the SEC's actions, but of the agency's independence and the right of the Commission to exercise it to further our critical mission.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary - Rick A. Fleming, Investor Advocate of the SEC, recently spoke at "NASAA Corporation Finance Training" held in Houston, Texas. Mr. Fleming discussed the SEC's undertaking of a comprehensive "Disclosure Effectiveness Initiative" to review and modernize public company reporting requirements in Regulation S-K and Regulation S-X. The initiative is, at least in part, responsive to congressional mandates found in the JOBS Act and the FAST Act. Highlights of Mr. Fleming's remarks included:
- The project can dispense with some low-hanging fruit with relative ease. No one wants disclosure requirements that are truly duplicative, overlapping, or outdated, and investors are not clamoring for rules that are unnecessarily burdensome, needlessly complex, or that result in distracting clutter. To the extent that the FAST Act addresses these types of issues, it reflects what I think is a fair criticism that the Commission does not do a very good job of updating or streamlining its rules.
- Investors do want disclosure rules that get companies to produce all the information that is important for investment and voting decisions. With this information, they can make well-informed decisions about allocating their capital. In this way, the disclosure requirements serve as a foundation for businesses to raise capital and our markets to thrive.
- The project should be judged on its success primarily in terms of the enhanced utility of corporate disclosures for the investing public. As the Initiative moves forward, the SEC should focus, first and foremost, on meeting the informational needs of investors. And, for this project to be successful, we must start by acknowledging that the SEC's methods for determining the needs of investors are as outdated as some of the disclosure rules.
- When people think of ways to reduce the burdens on issuers, they often jump to the conclusion that we should just scale the disclosure requirements so that smaller issuers are required to disclose less information. I think this is a dangerous path for both issuers and their investors.
- In addition to market participants, regulators also need to consider the characteristics and needs of this new generation of investors. For example, the SEC should continue its progress toward modernizing how data is structured and delivered to investors. The SEC should also consider how the informational needs of investors may change over time.
For more information, click
here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary - Rick A. Fleming, SEC Investor Advocate, recently spoke at the University of Maryland's Robert H. Smith School of Business Center for Financial Policy. Mr. Fleming examined the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) and the future of financial regulation. Mr. Fleming discussed rules covering the following areas that were addressed by the Act:
- Asset-backed securities;
- Derivatives; and
- Credit rating agencies.
On the broader subject of financial regulation, Mr. Fleming provided that "the protection of investors must serve as the first principle guiding our financial regulations. We should think of those regulations not as a burden to be repealed or picked apart haphazardly, but as the essential nutrient for flourishing capital markets, for a growing economy, and, yes, for the continued vibrancy of the American Dream."
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Accounting Standards Update No. 2017-01,
Business Combination (Topic 805): Clarifying the Definition of a Business
Summary
- The FASB has issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.
The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable.
For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Accounting Standards Update No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue form Contracts with Customers
Summary -
The FASB has issued Accounting Standards Update (ASU) No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for FASB Accounting Standards Codification™ Topic 606. Public entities should apply Topic 606 (and related amendments) for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Nonpublic entities should apply Topic 606 (and related amendments) for an annual reporting period beginning after December 15, 2018, (i.e., January 1, 2019, for a calendar year entity) and interim reporting periods within annual reporting periods beginning after December 15, 2019.
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU 2016-20 affect narrow aspects of the guidance issued in ASU 2014-09 as summarized below.
Issue 1: Loan Guarantee Fees: The amendments clarify that guarantee fees within the scope of Topic 460, Guarantees, (other than product or service warranties) are not within the scope of Topic 606.
Issue 2: Contract Costs - Impairment Testing: The amendments clarify that when performing impairment testing in Subtopic 340-40, Other Assets and Deferred Charges - Contracts with Customers, 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 it expects to receive in the future.
Issue 3: Contract Costs - Interaction of Impairment Testing with Guidance in Other Topics: The amendments clarify that impairment testing first should be performed on assets not within the scope of Topic 340, Topic 350, Intangibles - Goodwill and Other, or Topic 360, Property, Plant, and Equipment (e.g., Topic 330, Inventory), then assets within the scope of Topic 340, then asset groups and reporting units within the scope of Topic 360 and Topic 350.
Issue 4: Provisions for Losses on Construction-Type and Production-Type Contracts: The amendments require that the provision for losses be determined at least at the contract level. However, the amendments 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 amendments remove the term insurance from the scope exception to clarify that all contracts within the scope of Topic 944, Financial Services - Insurance, are excluded from the scope of Topic 606.
Issue 6: Disclosure of Remaining Performance Obligations: The amendments provide optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. The amendments also expand the information that is required to be disclosed when an entity applies one of the optional exemptions.
Issue 7: Disclosure of Prior-Period Performance Obligations: The amendments clarify that the disclosure of revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods applies to all performance obligations and is not limited to performance obligations with corresponding contract balances.
Issue 8: Contract Modifications Example: The amendments better align Example 7 with the principles in Topic 606.
Issue 9: Contract Asset versus Receivable: The amendments provide a better link between the analysis in Example 38, Case B and the receivables presentation guidance in Topic 606.
Issue 10: Refund Liability: The amendments remove the reference to the term contract liability from the journal entry in Example 40.
Issue 11: Advertising Costs: The amendments reinstate the guidance on the accrual of advertising costs and move the guidance to Topic 720, Other Expenses.
Issue 12: Fixed-Odds Wagering Contracts in the Casino Industry: The amendments: (a) create a new Subtopic 924-815, Entertainment - Casinos - Derivatives and Hedging, which includes a scope exception from the derivatives guidance for fixed-odds wagering contracts; and (b) includes a scope exception within Topic 815 for fixed-odds wagering contracts issued by casino entities. Fixed-odds wagering contracts are revenue transactions which should be recognized in accordance with Topic 606.
Issue 13: Cost Capitalization for Advisors to Private Funds and Public Funds: The amendments align the cost-capitalization guidance for advisors to both public funds and private funds in Topic 946, Financial Services - Investment Companies.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Accounting Standards Update No. 2016
-19,
Technical Corrections and Improvements
Summary -
The FASB has issued Accounting Standards Update (ASU) No. 2016-19, Technical Corrections and Improvements. The amendments cover a wide range of Topics in the Accounting Standards Codification. The amendments generally fall into one of the types of categories listed below.
- Amendments related to differences between original guidance (e.g., FASB Statements, EITF Issues, etc.) and the Codification. These amendments principally carry forward pre-Codification guidance or subsequent amendments into the Codification. Many times, either the writing style or phrasing of the original guidance did not directly translate into the Codification format and style. As a result, the meaning of the guidance might have been unintentionally altered. Alternatively, amendments in this category may relate to guidance that was codified without some text, reference, or phrasing that, upon review, was deemed important to the guidance.
- Guidance clarification and reference corrections that provide clarification through updating wording, correcting references, or a combination of both. In most cases, the feedback suggested that, without these enhancements, guidance may be misapplied.
- Simplification amendments that streamline or simplify the Codification through minor structural changes to headings or minor editing of text to improve the usefulness and understandability of the Codification.
- Minor improvements to the guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Accounting Standards Update No. 2016
-18,
Statement of Cash Flows (230): Restricted Cash
Summary -
The FASB has issued Accounting Standards Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows. The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows.
The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents.
The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The amendments should be applied using a retrospective transition method to each period presented.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Proposed Accounting Standards Update 2016-360 -
Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting
Summary -
The FASB has issued proposed ASU, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. Comments wer due by January 6, 2017. The amendments in this proposal would affect any entity that changes the terms or conditions of a share-based payment award.
The proposed amendments would provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity would account for the effects of a modification unless all the following are the same immediately before and after the modification:
- The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the award;
- The vesting conditions of the award; and
- The classification of the award as an equity instrument or a liability instrument.
The current disclosure requirements in Topic 718 would apply regardless of whether an entity is required to apply modification accounting under the proposed amendments. The proposed amendments would be applied prospectively to awards modified on or after the effective date, which will be determined after the FASB considers stakeholder feedback on the proposal.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Proposed Accounting Standards Update 2016-370
- Distinguishing Liabilities from Equity (Topic 480): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception
Summary -
The FASB has issued proposed Accounting Standards Update, Distinguishing Liabilities from Equity (Topic 480): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Comments are due by February 6, 2017.
The amendments in Part I of the proposal would change the accounting for certain equity-linked financial instruments (or embedded features) with down round features. The proposed amendments would require that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity would not consider the down round feature when assessing whether the instrument is indexed to its own stock. However, an entity would recognize the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) as follows:
- For a financial instrument classified as equity, an entity would recognize the value of the effect of the down round feature in equity as a dividend.
- For a financial instrument classified as a liability, an entity would recognize the value of the effect of the down round feature through a charge to net income.
- For financial instruments with down round features that have been triggered during the reporting period, an entity would disclose that the feature has been triggered, the value of the effect of the down round feature being triggered, and the financial statement line item in which that effect is recorded.
The amendments in Part II of the proposal are a recharacterization of the indefinite deferral of certain provisions of Subtopic 480-10 that are currently presented as pending content in the Codification, to a scope exception. These amendments will not have an accounting effect.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Proposed Accounting Standards Update EITF-16C -
Service Concession Arrangements (Topic 853) - Determining the Customer of the Operation Services
Summary -
The FASB has issued proposed Accounting Standards Update (ASU), Service Concession Arrangements (Topic 853) Determining the Customer of the Operation Services. Comments were due by January 6, 2017.
The proposed amendments would apply to the accounting by operating entities for service concession arrangements within the scope of Topic 853, Service Concession Arrangements.
This proposal addresses a diversity in practice in how an operating entity determines the customer of the operation services for transactions within the scope of Topic 853. To illustrate the main provisions of this proposal, consider an example in which a public-sector entity grantor (government) enters into an arrangement with an operating entity under which the operating entity will provide operation services (which include operation and general maintenance of the infrastructure) for a toll road that will be used by third-party users (drivers).
The proposed amendments would clarify that the grantor (government), rather than the third-party drivers, is the customer of the operation services in all cases for service concession arrangements within the scope of Topic 853.
For more information, click here.
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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