We are pleased to release MaloneBailey's October 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 Navigating the Uplisting & Upgrading Process: A Three-Part Series Featuring Perspectives from Nasdaq, NYSE and OTC Accounting and Regulatory Updates Recent FASB Updates FASB Proposed Accounting Standards Update 2019-770 —Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting  FASB Proposed Accounting Standards Update 2019-760 —Financial Services —Insurance (Topic 944): Effective Date  FASB Proposed Accounting Standards Update 2019-750 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)  Income Taxes – FASB Discusses Simplification to Income Taxes  Recent SEC Updates Release No. 33-10618A: FAST Act Modernization and Simplification of Regulation S-K; Correction  Release No. 33-10675: Order Making Fiscal Year 2020 Annual Adjustments to Registration Fee Rates  Release No. 34-84511: Commission Statement on Certain Provisions of Business Conduct Standards for Security Based Swap Dealers and Major Security-Based Swap Participants  Release No. 34-84429: Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding Certain Cyber-Related Frauds Perpetrated Against Public Companies and Related Internal Accounting Controls Requirements  U.S. Securities and Exchange Commission Strategic Plan  Release No. 33-10521: Concept Release on Compensatory Securities Offerings and Sales  Release No. 34-86901: Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail  SEC Staff Speech, Remarks to the Economic Club of New York by Chairman Jay Clayton  SEC Staff Speech, Remarks before the AICPA National Conference on Banks & Savings Institutions by Sagar Teotia, Chief Accountant  SEC Staff Q&A, Responses to Frequently Asked Questions Concerning Rule 606 of Regulation NMS  SEC Staff Speech, Cleveland, Kondo, and Capital - Remarks before the American Chamber of Commerce by Commissioner Hester M. Peirce  Regulatory Reform – SEC Commissioner Hester M. Peirce Discusses Regulatory Reform Tax Updates IRS Advises Virtual Currency Owners to Pay Back Taxes Extra Crunch CAMS: Resources and Implementation Provided by the PCAOB Portfolio Company Investments – AICPA Accounting and Valuation Guide Published  Auditing Standards Board – May 20-23, 2019 Meeting Minutes Published About MaloneBailey, LLP  Complimentary estimate for services Join our team!

Featured Podcast

Navigating the Uplisting & Upgrading Process: A Three-Part Series The October 2019 edition of The Crunch features a three-part podcast series on uplisting or upgrading between market tiers. Representatives from Nasdaq, NYSE and OTC share their insightful perspectives on the process, criteria and how to navigate common challenges as it pertains to uplisting or upgrading. Click on each image below to listen to the podcast.

Recent FASB Updates & Proposals

FASB Proposed Accounting Standards Update 2019-770 —Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting  Summary - The FASB has issued for public comment a proposed ASU that would provide temporary optional guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. Comments on the proposed ASU are due by October 7, 2019. Trillions of dollars in loans, derivatives, and other financial contracts reference LIBOR, the benchmark interest rate banks use to make short-term loans to each other. With global capital markets expected to move away from LIBOR and other interbank offered rates toward rates that are more observable or transaction based and less susceptible to manipulation, the FASB launched a broad project in late 2018 to address potential accounting challenges expected to arise from the transition. If adopted as proposed, the ASU would provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships affected by reference rate reform. The guidance would apply only to contracts or hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The guidance is intended to help stakeholders during the global market-wide reference rate transition period and would therefore be in effect for a limited time. Accordingly, the guidance would be effective upon issuance of final guidance and would not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2019-760 —Financial Services —Insurance (Topic 944): Effective Date  Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply a standard that addresses this area of financial reporting. Stakeholders are encouraged to review and provide comment on the proposed ASU by September 20, 2019. On August 15, 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts . The ASU made targeted amendments to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance companies. Since that time, the FASB received an agenda request to delay its effective date by one year. In response, FASB members and staff conducted outreach with numerous insurance companies that issue and/or reinsure long-duration contracts to better understand their implementation challenges and progress. Furthermore, last week, the FASB issued a proposed ASU that describes a new FASB philosophy for determining how effective dates for major standards are staggered between larger public companies and all other entities. Under this philosophy, a major standard would first be effective for larger public companies; effective dates for all other public and private companies and organizations would be staggered at least two years later. Generally, it is expected that early application would continue to be permitted for all entities. The proposed ASU would amend the effective dates for the long-duration insurance standard. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2019-750 —Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)  Summary - The FASB issued a proposed Accounting Standards Update (ASU) that would grant private companies, most not-for-profit organizations, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging. Stakeholders are encouraged to review and provide comment on the proposed ASU by September 16, 2019. The proposed ASU describes a new FASB philosophy that extends and simplifies how effective dates for major standards are staggered between larger public companies and all other entities. Those other entities include private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this philosophy, a major standard would first be effective for larger public companies. For all other entities, the FASB would consider requiring an effective date staggered at least two years later. Generally, it is expected that early application would continue to be permitted for all entities. "Based on what we’ve learned from our stakeholders, including the Private Company Council and the Small Business Advisory Committee, private companies, not-for-profit organizations, and some small public companies would benefit from additional time to apply major standards,” stated FASB Chairman Russell G. Golden. “This represents an important shift in the FASB’s philosophy around effective dates, one we believe will support better overall implementation of these standards.” Based on that philosophy, the FASB proposes to amend the effective dates for hedging, leases, and CECL as follows (assumes calendar-year end): Hedging: SEC Filers, January 2019; All Other Public Business Entities, January 2019, Private and All Others, January 2021. Leases: SEC Filers, January 2019; All Other Public Business Entities (Including Employee Benefit Plans and Not-for-Profit Conduit Bond Obligors that file or furnish financial statements with or to the SEC), January 2019, Private and all Others, January 2021. CECL: SEC Filers (Except SRCs, January 2023), January 2020; All Other Public Business Entities, January 2023, Private and all Others, January 2023. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Income Taxes – FASB Discusses Simplification to Income Taxes  Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on September 4, 2019, and discussed a summary of comments received on its May 2019 proposed Accounting Standards Update, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The FASB’s discussion focused on the following topics: Redeliberation issues; Transition and effective date; Analysis of costs and benefits; and Next steps. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recent SEC Updates & Proposals

Release No. 33-10618A: FAST Act Modernization and Simplification of Regulation S-K; Correction  Summary - The SEC has issued a technical correction to its previously published final rule, FAST Act Modernization and Simplification of Regulation S-K . This document: Reinstates certain item headings in registration statement forms under the Securities Act of 1933 that were inadvertently changed; Relocates certain amendments to the correct item numbers in these forms and reinstates text that was inadvertently removed; Corrects a portion of the exhibit table in Item 601(a) of Regulation S-K to make it consistent with the regulatory text of the amendments; and Corrects certain typographical errors and a cross-reference in the regulatory text of the amendments. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 33-10675: Order Making Fiscal Year 2020 Annual Adjustments to Registration Fee Rates  Summary - The SEC announced that in fiscal year 2020 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $129.80 per million dollars. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 34-84511: Commission Statement on Certain Provisions of Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants  Summary - The SEC has issued a statement setting forth the agency’s position, for a limited time period, that certain actions with respect to specific provisions of its Business Conduct Standards for Security-Based Swap (SBS) Dealers and Major Security-Based Swap Participants will not provide a basis for a Commission enforcement action. The statement also addresses the SEC’s position on the ability of parties to security-based swaps to rely on written representations previously provided in relation to swaps, also for a limited time period. The SEC’s statement is “intended to minimize potential market disruptions to existing counterparty relationships resulting solely from documentation implementation issues that may arise when security-based swap dealers and major security-based swap participants are required to register with the Commission. Upon registration with the Commission, entities that are also registered with the Commodity Futures Trading Commission (CFTC) will be required to comply with both the Commission’s Business Conduct Standards as well as analogous rules adopted by the CFTC in 2012 applicable to swap dealers and major swap participants.” For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 34-84429: Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding Certain Cyber-Related Frauds Perpetrated Against Public Companies and Related Internal Accounting Controls Requirements  Summary - The SEC issued an investigative report cautioning that public companies should consider cyber threats when implementing internal accounting controls. The report is based on the SEC Enforcement Division's investigations of nine public companies that fell victim to cyber fraud, losing millions of dollars in the process. According to the SEC, the investigations focused on "business email compromises" (BECs) in which perpetrators posed as company executives or vendors and used emails to dupe company personnel into sending large sums to bank accounts controlled by the perpetrators. The frauds in some instances lasted months and often were detected only after intervention by law enforcement or other third parties. Each of the companies lost at least $1 million, two lost more than $30 million, and one lost more than $45 million. In total, the nine companies wired nearly $100 million as a result of the frauds, most of which was unrecoverable. No charges were brought against the companies or their personnel. The companies, which each had securities listed on a national stock exchange, covered a range of sectors including technology, machinery, real estate, energy, financial, and consumer goods. Public issuers subject to the internal accounting controls requirements of Section 13(b)(2)(B) of the Securities Exchange Act of 1934 must calibrate their internal accounting controls to the current risk environment and assess and adjust policies and procedures accordingly. The SEC indicates that the “FBI estimates fraud involving BECs has cost companies more than $5 billion since 2013.” For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

U.S. Securities and Exchange Commission Strategic Plan  Summary - The SEC announced a new strategic plan to guide the agency’s work over the next four years with a primary focus on investors, innovation, and performance. The plan’s goals reflect the agency’s commitment to its longstanding mission while leveraging the opportunities and addressing the challenges that come from fast-evolving markets, products and services. The strategic plan includes the following goals:  Focus on the long-term interests of our Main Street investors. Recognize significant developments and trends in our evolving capital markets and adjust our efforts to ensure we are effectively allocating our resources. Elevate the SEC’s performance by enhancing our analytical capabilities and human capital development. The SEC’s new strategic plan was published in accordance with the Government Performance and Results Modernization Act of 2010, which requires federal agencies to outline their missions, planned initiatives, and strategic goals for a four-year period. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 33-10521: Concept Release on Compensatory Securities Offerings and Sales Summary - The SEC is soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the agency last substantively amended these rules in 1999. Comments were due September 24, 2018. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. 34-86901: Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail  Summary - The SEC proposed amendments to the national market system plan governing the Consolidated Audit Trail (the CAT NMS Plan). The Consolidated Audit Trail is intended to enable regulators to oversee the securities markets on a consolidated basis with the aim towards better protection of these markets and investors. According to the SEC, the proposed amendments would require self-regulatory organizations that are participants to the CAT NMS Plan (Participants) to file with the SEC and publish a complete implementation plan for the Consolidated Audit Trail and quarterly progress reports, each of which must be approved by the Operating Committee established by the CAT NMS Plan and submitted to the CEO, President, or equivalently situated senior officer at each Participant. In addition, the proposed amendments would include financial accountability provisions that establish target deadlines for four implementation milestones and reduce the amount of fee recovery available to the Participants if those target deadlines are missed. The public comment period will remain open for 45 days following publication of the proposing release in the Federal Register . For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Speech, Remarks to the Economic Club of New York by Chairman Jay Clayton  Summary - SEC Chairman Jay Clayton recently spoke to the New York Economic Club. Clayton covered three topics: Recent SEC issues; Observations on the SEC’s efforts to combat offshore corruption; and Current market issues. Regarding current market issues, Clayton briefly discussed the transition from LIBOR and Brexit. On the transition away from LIBOR, Clayton indicated “market participants should assess their exposure to LIBOR and decide how to actively manage that risk, and they should ensure that any contracts that extend beyond 2021 either (i) reference LIBOR and have effective fallback language or (ii) do not reference LIBOR.” Clayton indicated that the SEC continues to closely monitor the potential effects of Brexit on markets and market participants. Clayton encouraged “issuers, financial services firms and other market participants to fight off the complacency and fatigue that is endemic to situations of this type. I encourage you to continue to prepare for—and reasonably inform your investors of—the potential impacts of Brexit. At the SEC, we continue to work with our domestic and non-U.S. counterparts to identify and plan for potential Brexit-related impacts.” For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Speech, Remarks before the AICPA National Conference on Banks & Savings Institutions by Sagar Teotia, Chief Accountant    Summary - SEC Chief Accountant Sagar Teotia recently spoke at the AICPA’s National Conference on Banks & Savings Institutions . Teotia indicated that because of “the importance of accounting and auditing (both domestically and internationally), all stakeholders involved in the financial reporting system must contribute towards the collective goal of delivering high quality information to investors.” Teotia went on to discuss the role the SEC and its Office of the Chief Accountant (OCA) play in this system, including its efforts in overseeing standards setters, implementing new accounting standards or SEC rules, and implementing PCAOB standards. Topics covered by Teotia included implementation efforts by OCA on new standards or rules covering: Revenue recognition;  Leases;  Credit losses; and The Auditor’s Report (Critical Audit Matters). Teotia also discussed changes he expects in the financial reporting system that OCA will be active in, including the transition from LIBOR, the FASB’s project on distinguishing liabilities from equity, and audits of broker-dealers. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Q&A, Responses to Frequently Asked Questions Concerning Rule 606 of Regulation NMS     Summary - The staff in the SEC’s Division of Trading and Markets has issued a Q&A document on Rule 606 of Regulation NMS. In November 2018, the SEC adopted amendments to Rule 606 of Regulation NMS to require broker-dealers to provide enhanced disclosure of information regarding the handling of their customers’ orders. Rule 606, as amended, requires more meaningful disclosures relevant to today’s marketplace that encourage broker-dealers to provide more effective and competitive order handling and routing services and that also improve the ability of their customers to determine the quality of such broker-dealer services. For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

SEC Staff Speech, Cleveland, Kondo, and Capital - Remarks before the American Chamber of Commerce by Commissioner Hester M. Peirce  Summary - SEC Commissioner Hester M. Peirce recently discussed SEC regulatory reform efforts. Peirce indicated that the “regulation of public companies is a part of our jurisdiction that is crying out for reform. We have seen the trend of companies waiting longer to go public and have been asking ourselves what we can do to encourage companies to go public earlier and to remain public. We want to ensure that retail investors can participate in the growth of these companies.” For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Regulatory Reform – SEC Commissioner Hester M. Peirce Discusses Regulatory Reform Summary - SEC Commissioner Hester M. Peirce recently discussed SEC regulatory reform efforts. Peirce indicated that the “regulation of public companies is a part of our jurisdiction that is crying out for reform. We have seen the trend of companies waiting longer to go public and have been asking ourselves what we can do to encourage companies to go public earlier and to remain public. We want to ensure that retail investors can participate in the growth of these companies.”  For more information, click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Tax Updates

IRS Advises Virtual Currency Owners to Pay Back Taxes According to an IRS press release dated July 26, 2019, the IRS has started to send letters to taxpayers with virtual currency transactions that may have failed to report income and pay the resulting tax from virtual currency transactions or did not properly report their transactions. As stated in the press release, "Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties," said IRS Commissioner Chuck Rettig. "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations." To review the full press release, please click here . If you have any questions, please don’t hesitate to contact Nicole Zhao at nzhao@malonebailey.com .

Extra Crunch

CAMs: Resources and Implementation Provided by the PCAOB Summary - The PCAOB provides various resources on Critical Audit Matters (CAMs), including one-pagers, videos and more. Per the PCAOB w ebsite, "CAMs are intended to provide tailored information specific to the audit—from the auditor’s point of view—on matters that require especially challenging, subjective, or complex auditor judgment." In addition, per the website, "the new requirement for CAMs is a result of the PCAOB’s 2017 standard AS 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, which made significant changes to the auditor’s report." For more information, please click here .

Portfolio Company Investments – AICPA Accounting and Valuation Guide Published  Summary - The AICPA has published the Accounting and Valuation Guide, Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies . This guide has been developed by the AICPA PE/VC Task Force. This guide provides guidance and illustrations for preparers of financial statements, independent auditors, and valuation specialists regarding the accounting for and valuation of portfolio company investments of venture capital funds, private equity funds and other investment companies. The valuation guidance in this guide is focused on measuring fair value for financial reporting purposes.  For more information, please click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Auditing Standards Board – May 20-23, 2019 Meeting Minutes Published The AICPA’s Auditing Standards Board has published meeting minutes from its May 20-23, 2019 meeting. Topics discussed at this meeting included: Materiality; Audit evidence; Other information; Estimates; and Attestation standards. For more information, please click here . © 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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