We are pleased to release MaloneBailey's April 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 www.malonebailey.com

What's the Crunch? Featured Podcast Consolidation Regarding Interests Held Through Related Parties Under Common Control Accounting and Regulatory Updates Recent FASB Updates & Proposals FASB Accounting Standards Updates - Accounting Standards Update No. 2019-01 —Leases (Topic 842) —Codification Improvements FASB Proposed Accounting Standards Update 2019-400 —Compensation —Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) —Codification Improvements —Share-Based Consideration Payable to a Customer Convertible Debt – FASB Discusses Distinguishing Liabilities from Equity New Edition of AICPA Accounting and Audit Guide on Revenue Recognition Published Recent SEC Updates & Proposals SEC Staff Speeches, Festivus, Fortnite, and Focus: Remarks before the Council of Institutional Investors Spring Conference by Commissioner Hester M. Peirce SEC Staff Speeches, Statement on Shareholder Proposals Seeking to Require Mandatory Arbitration Bylaw Provisions by Chairman Jay Clayton Release No. 33-10607: Solicitations of Interest Prior to a Registered Public Offering  Regulation S-K – SEC Staff Updates Regulation S-K Interpretation Tax Updates 'Dirty Dozen' Scams Extra Crunch FINRA's Official Podcast: Unscripted About MaloneBailey, LLP

Featured Podcast

The featured podcast for April 2019 highlights a discussion on a FASB Accounting Standards Update (ASU) that amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Simply click the podcast image below to listen to Audit Partner Steven Vertucci's commentary on the topic. Should you have any questions or would like additional information on this ASU, Steven's contact information is below.

Recent FASB Updates & Proposals

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-01 —Leases (Topic 842) —Codification Improvements Summary -   The FASB has issued an ASU that addresses two lessor implementation issues and clarifies that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new leases standard, Topic 842,  Leases . ASU 2019-01 aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of  fair value  (in Topic 820,  Fair Value Measurement ) should be applied. The ASU also requires lessors within the scope of Topic 942,  Financial Services—Depository and Lending , to present all “principal payments received under leases” within investing activities. Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2019-400 —Compensation —Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) —Codification Improvements —Share-Based Consideration Payable to a Customer Summary -   The FASB has issued proposed Accounting Standards Update (ASU)  Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer.  Comments on the proposed ASU are due April 18, 2019. The amendments in this proposed ASU require entities to measure and classify share-based payments to a customer by applying the guidance in Topic 718. The amount that would be recorded as a reduction in revenue would be measured on the grant-date fair value of the share-based payment in accordance with Topic 718. The grant date is the date on which the grantor (supplier) and a grantee (customer) reach a mutual understanding of the key terms and conditions of a share-based payment award. The classification and subsequent measurement of the award would be subject to Topic 718 unless the share-based payment award is subsequently modified and the grantee is no longer a customer. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Convertible Debt – FASB Discusses Distinguishing Liabilities from Equity Summary -  As reported in its “Summary of Board Decisions” publication, the FASB met on February 13, 2019, and deliberated disclosures for convertible instruments and decided to: Add disclosure objectives for convertible debt and for convertible preferred shares. Amend disclosure guidance related to certain terms and features of convertible instruments. Amend the guidance in Subtopic 825-10, Financial Instruments—Overall (which applies to public business entities) to require disclosure of information about fair value and leveling of convertible instruments at the individual instrument level together with the related carrying amount. Centralize guidance on convertible debt in Subtopic 470-20, Debt—Debt with Conversion and Other Options, and guidance on convertible preferred shares in Topic 505, Equity.  Improve the format of disclosing certain quantitative information about convertible instruments. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

New Edition of AICPA Accounting and Audit Guide on Revenue Recognition Published Summary - The AICPA has published a new edition of its Accounting and Audit Guide, Revenue Recognition . This AICPA Audit and Accounting Guide has been developed by the AICPA Industry Revenue Recognition Task Forces, Revenue Recognition Working Group, and Auditing Revenue 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 accordance with U.S. generally accepted accounting principles (GAAP). Specifically, this guide is intended to help entities and auditors prepare for changes related to revenue recognition as a result of FASB Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , and subsequent ASUs amending FASB Accounting Standards Codification 606, Revenue from Contracts with Customers . This updated version reflects new and/or updated industry implementation issues since the last edition and includes guidance on FASB Accounting Standards Updates (ASU) issued through FASB ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606 . This edition also includes a comprehensive set of indexes. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recent SEC Updates & Proposals

SEC Staff Speeches, Festivus, Fortnite, and Focus: Remarks before the Council of Institutional Investors Spring Conference by Commissioner Hester M. Peirce Summary  - SEC Commissioner Hester M. Peirce recently spoke about the SEC’s current disclosure requirements and the agencies efforts to improve it. Peirce indicated that with the engagement of investors of all sizes and types, the SEC “is thinking about ways that we can refine our offering and disclosure regime. Just last month, for example, we proposed extending the popular “testing the waters” provision to all issuers, a change we hope will facilitate a more efficient and easily navigable public offering process. Other recent initiatives include extending the Regulation A exemption to all issuers, including reporting companies; expanding the definition of smaller reporting company; and conducting a broad sweep of existing disclosure requirements to weed out those that have become redundant or outdated. While these regulatory efforts, we hope, will help smooth the path for registrants, we expect investors also to reap considerable benefits from reductions in the regulatory costs that issuers pass on to investors and from expanded investment opportunities.”   For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Speeches, Statement on Shareholder Proposals Seeking to Require Mandatory Arbitration Bylaw Provisions by Chairman Jay Clayton Summary  - SEC Chairman Jay Clayton issued a statement on shareholder proposals seeking to require mandatory arbitration bylaw provisions. Clayton indicated that the issue of mandatory arbitration provisions in the bylaws of U.S. publicly-listed companies has generated a great deal of attention. Clayton cited previous informal inquiries about whether the staff in the SEC’s Division of Corporation Finance (Corp Fin) would declare effective the registration statement of a domestic company seeking to include mandatory arbitration provisions in its governing documents at the time of its initial public offering. In general, Clayton indicated that if the issue were to arise in an actual initial public offering of a domestic company, it would not be appropriate for resolution at the staff level but would rather be best addressed in a measured and deliberative manner by the SEC. Clayton cited a more recent request in which a domestic, publicly-listed company has received a shareholder proposal that would require the company to take steps to adopt mandatory arbitration provisions. The company asked Corp Fin for informal guidance on whether the company may exclude the proposal from its proxy statement. In response to the inquiry, Clayton indicated that this “is a complex matter under both federal and state law, and it has been interpreted differently by the company (arguing that such a clause would violate both state and federal law) and the proponent (arguing that such a clause would not violate state or federal law). The staff considered in its analysis the arguments made by the company, the proponent and the Attorney General of New Jersey, the state’s chief law enforcement officer and legal advisor. The staff issued a response stating that it would not recommend enforcement action should the company decide to exclude the proposal on the grounds that it would violate New Jersey state law.” Corp Fin explicitly noted that it was not expressing a view as to whether the proposal, if implemented, would cause the company to violate federal law. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 33-10607: Solicitations of Interest Prior to a Registered Public Offering   Summary -  The SEC voted to propose an expansion of a popular modernization reform that would permit investor views about potential offerings to be considered at an earlier stage in the process than is the case today. The new rule and related amendments would expand the "test-the-waters" accommodation—currently available to emerging growth companies or "EGCs"—to all issuers, including investment company issuers. According to the SEC, this proposal would allow all prospective issuers, not just EGCs, to gauge market interest in a possible initial public offering or other proposed registered securities offering by permitting discussions with certain investors prior to the filing of a registration statement. The proposed reform builds on a popular similar provision of the Jumpstart Our Business Startups Act (JOBS Act) that has been limited to EGCs. Generally, companies with more than $1 billion in annual revenues do not qualify as EGCs and, therefore, have not benefited from JOBS Act provisions intended to foster capital formation in the public markets. The proposed rule follows action taken by the Division of Corporation Finance in 2017 to extend another EGC reform to all issuers: the ability to initially submit certain filings in draft, non-public form. As a result of that policy change, all issuers, not just EGCs, have been able to make non-public filings with the SEC as they begin the process of becoming a public company. The proposed test-the-waters rule and related amendments are intended to provide increased flexibility to issuers with respect to their communications with institutional investors about contemplated registered securities offerings, as well as a cost-effective means for evaluating market interest before incurring the costs associated with such an offering. The proposal will have a 60-day public comment period following its publication in the  Federal Register .  For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Regulation S-K – SEC Staff Updates Regulation S-K Interpretation Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated its Compliance and Disclosure Interpretation (C&DI), Regulation S-K . This C&DI provides Corp Fin’s interpretations of various sections of Regulation S-K. Corp Fin has added new Questions 116.11 and 133.13. These questions include guidance on preparing Item 401 disclosure relating to director qualifications. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Tax Updates

'Dirty Dozen' Scams By Nicole Zhao, CPA, Senior Tax Manager at MaloneBailey, LLP The IRS published its annual "Dirty Dozen" list of tax scams on March 20, 2019. The purpose of the list is to alert taxpayers of schemes during tax-filing seasons. In addition, the IRS reminds taxpayers that they are legally responsible for what is on their tax return even if prepared by someone else. Below is a recap of this year’s “Dirty Dozen” scams: Phishing Phone Scams Identity Theft Return Preparer Fraud Inflated Refund Claims Falsifying Income to Claim Credits Falsely Padding Deductions on Returns Fake Charities Excessive Claims for Business Credits Offshore Tax Avoidance Frivolous Tax Arguments Abusive Tax Shelters Please find more information about these scams on the IRS website by clicking here . Please contact Nicole Zhao, Senior Tax Manager, if you have any comments and concerns related to the "Dirty Dozen" list.

Extra Crunch

Unscripted : FINRA's Official Podcast FINRA offers a resource known as Unscripted , a podcast that discusses regulatory topics. Per the FINRA website, " Unscripted is the voice of the nation’s largest non-government securities regulator. We bring together FINRA leaders to discuss existing and emerging regulatory topics that impact the broker-dealer industry. We share best practices for compliance officers, insights into the operations of a 3,500 person self-regulated organization and educational tools and information for investors. Every investor in America relies on one thing: fair financial markets. That is what FINRA works every day to ensure." To access Unscripted , please click here .

About MaloneBailey, LLP

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