We are pleased to release MaloneBailey's March 2019 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  SEC ,  FASB   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

  • Improving the Advancement of Women CPAs

Accounting and Regulatory Updates

Recent FASB and SEC Updates & Proposals

  • FASB Proposed Accounting Standards Update 2019-100 —Targeted Transition Relief for Topic 326, Financial Instruments —Credit Losses
  • Episodic Television Series – FASB Ratifies EITF Decision
  • Credit Losses – AICPA Accounting and Auditing Guide Published
  • Income Taxes -- FASB Discusses Disclosure Framework
  • January Edition of The Crunch: What You Need to Know for FASB in 2019 & a Review of 2018 FASB Updates

Tax Updates

  • Frequently Asked Questions & Answers Regarding 2018/2019 Tax Updates

Extra Crunch

  • RADIATE: Video Lessons from NYSE
  • NYSE SLICE: Interviews with change agents
  • Nasdaq's Tomorrow's Capital Podcast

About MaloneBailey, LLP
Featured Podcast
In honor of International Women's Day on March 8, 2019, our featured podcast for March 2019 highlights a December 2018 article published in the annual state of the profession edition of The CPA Journal , which was authored by MaloneBailey Audit Partners, George Qin and Steven Vertucci. The article focuses on the topic of improving the advancement and retention of women CPAs. 

Flexibility and public accounting don’t always go hand in hand, but joining the two in a thoughtful, constructive, and effective way is advantageous to women. Balancing demanding work schedules with the desire to raise a family gives rise to a common challenge in the accounting world: the retention of women. Click  here for our CPA Journal article on this very topic and some of the best practices we share.

The podcast discussion on the topic of improving the advancement of women CPAs and diversity in the workplace is available below. Simply click the podcast image below to listen.
Recent FASB Updates & Proposals
FASB Proposed Accounting Standards Update 2019-100 — Targeted Transition Relief for Topic 326, Financial Instruments —Credit Losses

Summary -  The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) that would ease transition to the credit losses standard by providing the option to measure certain types of assets at fair value. Stakeholders are asked to review and provide comments on the proposal by Friday, March 8, 2019.

Issued in 2016, the credit losses standard introduced the expected credit losses method for measuring credit losses on financial assets measured at amortized cost, replacing the previous incurred loss method. It also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis.

Some stakeholders, including auto financing institutions that extend credit to borrowers with limited or impaired credit histories, noted that certain financial statement preparers have begun (or are planning) to elect the fair value option on newly originated or purchased financial assets that have historically been measured at amortized cost. They noted that electing the fair value option would require them to maintain dual measurement methods, fair value measurements and amortized cost basis.

The proposed ASU would allow preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This would increase the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

For more information, click here .

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Episodic Television Series – FASB Ratifies EITF Decision

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 30, 2019, and ratified the consensus reached at the January 17, 2019 EITF meeting on EITF Issue No. 18-B, “Improvements to Accounting for Episodic Television Series.” The FASB directed its staff to draft an Accounting Standards Update reflecting the consensus for vote by written ballot. See our Literature Update for complete details.

For more information, click here .

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Credit Losses – AICPA Accounting and Auditing Guide Published  

Summary - The AICPA has published a new Accounting and Auditing Guide, Credit Losses. This new guide has been developed by the AICPA Credit Losses Task Forces, to assist practitioners in performing and reporting on their audit engagements and to assist management in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles (GAAP). Specifically, this guide is intended to help entities and auditors prepare for changes related to credit loss as a result of ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent ASUs amending FASB Accounting Standards Codification Topic 326, Financial Instruments—Credit Losses.

For more information, click here .

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Income Taxes -- FASB Discusses Disclosure Framework

Summary - As reported in its "Summary of Board Decisions" publication, the FASB met on January 23, 2019, and continued redeliberations of its July 2016 proposed ASU, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes. The FASB discussed external review comments on a draft of a revised proposed Update, including whether tax expense and taxes paid on foreign earnings that are imposed by the country of domicile of the entity should be classified as a foreign or domestic amount.

The FASB decided not to require that an entity disclose the amount of the transition tax liability resulting from the Tax Cuts and Jobs Act and the line item in the statement of financial position in which the liability is presented. The FASB also decided not to require that an entity disclose a description of a legally enforceable agreement with a government, including the duration of the agreement, the commitments made with the government under that agreement, and the amount of benefit that reduces or may reduce its income tax burden.

The FASB directed the staff to perform outreach on the operability and benefits of classifying tax expense and taxes paid on foreign earnings that are imposed by the country of domicile of the entity as a foreign or domestic amount. 

For more information, click here .

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
January Edition of The Crunch: What You Need to Know for FASB in 2019 & a Review of 2018 FASB Updates

This special edition of The Crunch highlights FASB updates that are going into effect in 2019 as well as a review of the FASB updates that went into effect in 2018. T he following topics are covered in the newsletter.

To review the January issue of our newsletter, as well as all past issues, please click here .

FASB: What You Need to Know for 2019
Leases

  • Leases (Topic 842)
  • Lases (Topic 842): Narrow-Scope Improvements for Lessors
  • Leases (Topic 842): Targeted Improvements
  • Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842
  • Codification Improvements to Topic 842, Leases

Derivatives & Hedging

  • Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting
  • Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities

Other Topics

  • Codification Improvements
  • Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
  • Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
  • Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (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
  • Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities
  • Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting

FASB: A Review of 2018 Updates
Revenue from Contracts with Customers

  • Revenue from Contracts with Customers (Topic 606)
  • Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
  • Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
  • Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
  • Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
  • Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
  • Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting
  • Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments

Financial Instruments

  • Financial Instruments─Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities 
  • Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10)

Statement of Cashflows
  • Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
  • Statement of Cash Flows (Topic 230): Restricted Cash

Income Taxes

  • Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
  • Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118

Compensation

  • Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
  • Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting

Other Topics

  • Liabilities —Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products
  • Business Combinations (Topic 805): Clarifying the Definition of a Business
  • Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
  • Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services
  • Investments—Debt Securities (Topic 320 and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273
Tax Updates
Frequently Asked Questions & Answers Regarding 2018/2019 Tax Updates
By Nicole Zhao, CPA, Senior Tax Manager at MaloneBailey, LLP

This article covers some of the commonly asked questions I receive during tax season along with the responses I provide.
 
Q. The federal government was partially shut down, which created delays and backlogs within the government. Can I pay my taxes and file my income tax returns later?
A. No. The IRS announced that the tax season began January 28, 2019. The shutdown will impact the IRS’s processing time, but it does not extend the tax due dates.   Partnership and S Corporation tax returns are due by March 15, 2019, while C Corporation and individual income tax returns are due by April 15, 2019. If you need additional time to digest the new tax law, you may apply for a 6-month extension to file your tax return. However, the tax payments are due by the original due dates.
 
Q. I am an individual taxpayer. Do I need to hire a tax CPA to deal with the tax reform?
A. It depends. One of the goals for tax reform is to make tax filing simpler for taxpayers. The IRS has published the 2018 form 1040 ( https://www.irs.gov/pub/irs-pdf/f1040.pdf ), which appears to be much shorter than the 2017 version. For those who have business income, tax returns can be way more complicated than before. Talking to a CPA is always recommended.
 
Q . Are itemized deductions obsolete beginning in 2018?
A. It is a misconception. Itemized deductions are not obsolete after the tax reform. However, some limitations have been added to the state taxes and mortgage interest deductions; at the same time, the standard deduction has been increased to $24,000 for married filing jointly taxpayers. For many families, it turns out that the standard deduction is more than the itemized deductions.
 
Q. I had a new baby in 2018. I was told that the personal exemption is gone. Does Congress provide any support to welcome babies?
A. The child tax credit is $2,000 per child and the phase-out threshold is $400,000 for married filing jointly family. Before 2018, the credit was $1,000 per child and the phase-out kicked in when family income reached $110,000. So, welcome babies.
 
Q. I heard about 20% additional tax deduction for pass-through entities. What is that?
A. It’s called Qualified Business Income (QBI) Deduction under Internal Revenue Code 199A. The rules are complicated and there are several things we want to clarify:
  • It is a benefit not only for partnership and S Corporation but also for individuals who conduct a trade or business. Don’t exclude yourself simply because you did not set up an LLC for your business. In fact, the deduction is claimed on form 1040 line 9.
  • A trade or business for IRC 199A purpose is different from non-passive activities defined in IRC 469. You do not need to materially participate in a trade or business in order to claim this deduction.
 
Q. I have read about discussion regarding real estate investors’ eligibility to claim the QBI deduction. Some say yes while the others say no. I’m very confused.
A. The essential issue is whether the taxpayer’s real estate business is a trade or business under Internal Revenue Code (IRC) 199A, as the QBI is available only to a trade or business. Again, this definition has nothing to do with the passive activity under IRC 469. Don’t walk away simply because your rental activity loss is limited. Sometimes it is hard to tell whether a business or an investment is a trade or business. The IRS recently issued a proposed revenue procedure to provide a safe harbor for certain real estate enterprises that may be treated as a trade or business for purpose of the QBI deduction ( https://www.irs.gov/pub/irs-drop/n-19-07.pdf ). It is not a final rule, but the taxpayer can rely on this until further decision is made by the IRS.
 
Q. I am the owner of a small business. With an estimated 20% additional deduction on the business income, I expect lower income taxes in 2018 and thus, I did not pay my individual estimated tax payments. Now I see that there are lots of limitation in calculating the QBI deduction. What will happen if my tax payments fell short?
A. The IRS recently announced that it will waive the estimated tax penalty for any taxpayer who paid at least 85% of their total tax liability for 2018. Without this special waiver, the threshold is 90% to avoid a penalty.
 
Q. With the changes in corporation and individual tax rates, are there any changes on the withholding tax rates for foreign corporations and individuals?
A. Yes. For example, the withholding tax on foreign partners’ share of Effectively Connected Income has changed from 35% to 21% for corporate foreign partners, and from 39.6% to 37% for non-corporate foreign partners.

Should you have any questions, please contact Nicole Zhao for more information.
Extra Crunch
RADIATE: Video Lessons from the NYSE

NYSE offers a resource known as RADIATE, a series of videos that feature an all-star line-up of experts that range from Ariana Huffington to Earvin "Magic" Johnson and from Ed Bastian, CEO of Delta Airlines to Hamdi Ulukaya, Founder and CEO of Chobani. Experts provide their thoughts and insights via video interviews on a variety of topics that include career planning, employee retention, habits, time management, emotional intelligence, thinking like a CEO, process and performance optimization, conflict management and so much more.

To access RADIATE, please click here .
NYSE SLICE: "Take a Step Back from the Daily Noise"

Another resource offered by the NYSE is Slice. According to the website, it's "branded Slice because of the collaboration between Cheddar and Intercontinental Exchange, which operates the NYSE. These in-depth interviews help viewers “slice” through the noise to get to the truth of what CEOs, entrepreneurs and innovators are doing to change our future." Conversations air on Cheddar from 8-10am ET every Wednesday and coincide with the NYSE Opening Bell. You can find Cheddar on DirecTV, Hulu, Twitter, Amazon and cheddar.com.

For more information about Slice and/or to watch the current episode, please click here .
Nasdaq's Tomorrow's Capital Podcast

Tomorrow's Capital is a Nasdaq podcast that focuses on the question, "are we there yet?" According to the Nasdaq website, "t he journey through economic history is filled with stories from leaders and innovators who have attempted to answer that question. In our podcast, Tomorrow's Capital , we interview thought leaders, influencers, and industry titans who have made their unique mark on our current economic landscape and those who are reshaping the markets in the years to come." In one of its more recent episodes, the CFO of PayPal, John Rainey, is interviewed on the future of mobile payments. Topics such as this and much more offer compelling conversations about relevant topics affecting our current economic landscape.

To access Tomorrow's Capital , 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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