August 2019: Latest SEC, FASB & Tax Updates

We are pleased to release MaloneBailey's August 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

Improving the Advancement of Women CPAs

Accounting and Regulatory Updates

Recent FASB Updates

FASB Staff Q&A: Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets
FASB Invitation to Comment 2019-720 - Identifiable Intangible Assets and Subsequent Accounting for Goodwill
FASB Proposed ASU 2019-710 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses
FASB Proposed ASU 2019-600 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
FASB Proposed ASU 2019-700 - Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
FASB Discusses Improvement to Segment Reporting
FASB Discusses Credit Loss Standard Implementation

Recent SEC Updates

Release No. BHCA-6 - Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds
Release No. 34-86175 - Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers
Release No. 33-10645: Adoption of Updated EDGAR Filer Manual
Release No. 33-10649: Concept Release on Harmonization of Securities Offering Exemptions
Release No. 33-10648: Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships
SEC Staff Speech, Regulation Best Interest and the Investment Adviser Fiduciary Duty: Two Strong Standards that Protect and Provide Choice for Main Street Investors by Chairman Jay Clayton
SEC Staff Views: Staff Statement on LIBOR Transition
SEC Staff Views: Division of Corporation Finance - Financial Reporting Manual
SEC Staff Speech, Baby on Board - Remarks before the Society for Corporate Governance National Conference by Commissioner Hester M. Peirce
Release No. 33-10635: Amendments to Financial Disclosures about Acquired and Disposed Businesses
Release No. 34-85823: Proposed Rule Amendments and Guidance Addressing Cross-Border Application of Certain Security-Based Swap Requirements
Release No. 34-85814: Amendments to the Accelerated Filer and Large Accelerated Filer Definitions
SEC Approves PCAOB Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists
SEC Approves PCAOB Auditing Standard 2501

Tax Updates

Employer Credit for Paid Family and Medical Leave

Extra Crunch

IASB Proposes to Update Conceptual Framework Reference in IFRS 3
Single Audits – AICPA Publishes New Edition of Audit and Accounting Guide
State and Local Governments – AICPA Publishes New Edition of Audit and Accounting Guide
Digital Assets – Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities Published

About MaloneBailey, LLP

Featured Podcast

Our featured podcast for August 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 Staff Q&A: Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets

Summary - The FASB has published a FASB Staff Q&A, Topic 326, No. 2 - Developing an Estimate of Expected Credit Losses on Financial Assets . This document provides guidance from the FASB regarding the guidance in Topic 326, Financial Instruments—Credit Losses . This Q&A does not address other regulatory, rules, or compliance requirements that entities may need to consider when preparing and issuing financial statements.

For more information, click here .

FASB Invitation to Comment 2019-720 - Identifiable Intangible Assets and Subsequent Accounting for Goodwill

Summary - The FASB issued an Invitation to Comment (ITC) seeking stakeholder input on the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill. Stakeholders are asked to comment on the ITC by October 7, 2019.

Private companies and not-for-profit organizations currently have accounting alternatives on this topic. However, in preliminary outreach with public company stakeholders, the FASB staff received mixed feedback on whether the utility of the information currently being provided justifies the cost of providing it. Therefore, the staff is seeking further input from a broader base of stakeholders to inform the FASB’s future deliberations.

After receiving comments, the FASB will host a formal roundtable (at a to-be-determined date) to supplement stakeholders’ feedback.

For more information, click here .

FASB Proposed ASU 2019-710 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses

Summary - The FASB issued for public comment a proposed Accounting Standards Update (ASU) that addresses items raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . Stakeholders were encouraged to review and provide input on the proposed ASU by July 29, 2019.

A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).

If adopted as proposed, this ASU would permit organizations to record negative allowances on PCD assets.

In addition to other narrow technical improvements, the proposed ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.

For more information, click here .

FASB Proposed ASU 2019-600 - Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

Summary - The FASB has issued a proposed ASU, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. Comments were due by June 28, 2019.

SEC Referral to FASB

The FASB is proposing these amendments in response to a referral the SEC made to the FASB for potential incorporation into the FASB Accounting Standards Codification™ (Codification). The referral includes certain SEC disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles (GAAP).

Presentation and Disclosure Requirements

These proposals, if adopted as planned, would amend a number of Codification Topics. The primary proposed amendments would modify disclosure or presentation requirements in the particular Topics. Others clarify or make technical corrections to current requirements.

The proposed amendments would apply to all entities within the scope of the affected Topics, unless otherwise indicated.

The proposed ASU provides a summary table of the proposed amendments in the “Amendment to the FASB Accounting Standards Codification” section. The amendments affect the following Codification provisions, among others:

Amendments to the Master Glossary;
Topic 205, Presentation of Financial Statements;
Topic 250, Accounting Changes and Error Corrections;
Topic 260, Earnings Per Share;
Topic 270, Interim Reporting;
Topic 505, Equity;
Topic 805, Business Combinations;
Topic 815, Derivatives and Hedging;
Topic 830, Foreign Currency Matters; and
Topic 850, Related Party Transactions.

Effective Dates

The FASB will determine the effective dates of the proposed amendments after consideration of comments. The FASB expects the amendments to be applied prospectively to financial instruments issued after the effective date.

For more information, click here .

FASB Proposed ASU 2019-700 - Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes

Summary - The FASB has issued a proposed ASU intended to reduce cost and complexity for the accounting for income taxes. The proposal is a part of the FASB’s Simplification Initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

The Proposal

The proposal would remove specific exceptions to the general principles in Topic 740, Income Taxes, in Generally Accepted Accounting Principles (GAAP). The proposed ASU eliminates the need for an organization to analyze whether the following apply in a given period:

Exception to the incremental approach for intraperiod tax allocation;
Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and
Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The proposed ASU also would improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for:

Franchise taxes that are partially based on income;
Transactions with a government that result in a step up in the tax basis of goodwill;
Separate financial statements of legal entities that are not subject to tax; and
Enacted changes in tax laws in interim periods.

The proposed ASU would not create new accounting requirements not previously included in Topic 740.

Comment Period

Stakeholders were asked to comment on the proposal by June 28, 2019.

For more information, click here .

FASB Discusses Improvement to Segment Reporting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on May 29, 2019, and discussed improvements to segment reporting. As part of developing the topics for a study on segment disclosures, the FASB discussed options to both require that segment information be reported in a financial statement format and require additional general disclosures in Topic 280, Segment Reporting .

The FASB discussed the merits of the financial statement format alternative. Because the complexities related to that alternative would likely overwhelm the other issues included in the study, the FASB decided to exclude that alternative from the study. However, the FASB directed the staff to undertake research into how the segment reconciliation requirements could be improved.

The FASB also directed the staff to study the effect of including additional general segment disclosure requirements.

The FASB gave permission for the staff to proceed with the study.

For more information, click here .

FASB Discusses Credit Loss Standard Implementation

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on June 5, 2019 and discussed the following three topics raised by stakeholders during the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments :

Negative Allowances on Purchased Financial Assets with Credit Deterioration;
Negative Allowances on Available-for-Sale Debt Securities; and
Miscellaneous Technical Improvements Related to Update 2016-13.

For more information, click here .

Recent SEC Updates & Proposals

Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds - Release No. BHCA-6

Summary - The SEC and four other federal financial regulatory agencies announced that they adopted a final rule to exclude community banks from the Volcker Rule , consistent with the Economic Growth, Regulatory Relief, and Consumer Protection Act .

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds. Under the final rule, which is unchanged from the proposal, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5 percent or less of total consolidated assets are excluded from the Volcker Rule .

The final rule also permits a hedge fund or private equity fund, under certain circumstances, to share the same name or a variation of the same name with an investment adviser as long as the adviser is not an insured depository institution, a company that controls an insured depository institution, or a bank holding company.

For more information, click here .

Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers - Release No. 34-86175

Summary - In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has adopted capital and margin requirements for security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), segregation requirements for SBSDs, and notification requirements with respect to segregation for SBSDs and MSBSPs.

The SEC increased the minimum net capital requirements for broker-dealers authorized to use internal models to compute net capital requirements for broker-dealers that are not SBSDs to the extent they engage in security-based swap and swap activity. The Commission also is making substituted compliance available with respect to capital and margin requirements under Section 15F of the Exchange Act and the rules thereunder and adopting a rule that specifies when a foreign SBSD or foreign MSBSP need not comply with the segregation requirements of Section 3E of the Exchange Act and the rules thereunder. (“ANC broker-dealers”), and prescribing certain capital and segregation requirements for broker-dealers that are not SBSDs to the extent they engage in security-based swap and swap activity.

The SEC also is making substituted compliance available with respect to capital and margin requirements under Section 15F of the Exchange Act and the rules thereunder and adopting a rule that specifies when a foreign SBSD or foreign MSBSP need not comply with the segregation requirements of Section 3E of the Exchange Act and the rules thereunder.

These rules are effective 60 days after publication in the Federal Register. The rules also contain certain compliance dates.

For more information, click here .

Adoption of Updated EDGAR Filer Manual - Release No. 33-10645

Summary - The SEC has published an update to the EDGAR Filer Manual . The revisions to the manual include a modernized interface for completing an application for EDGAR access and updates to incorporate SEC changes related to inline XBRL information on filing cover pages.

This update is effective upon publication in the Federal Register.

For more information, click here .

Concept Release on Harmonization of Securities Offering Exemptions - Release No. 33-10649

Summary - The SEC is requesting public comment on ways to simplify, harmonize, and improve the exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and to promote capital formation.

The concept release seeks input on whether changes should be made to improve the consistency, accessibility, and effectiveness of the SEC’s exemptions for both companies and investors, including identifying potential overlap or gaps within the framework. It also considers, among other things, whether:

The limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection or pose an undue obstacle to capital formation or investor access to investment opportunities.
The SEC should take steps to facilitate a company’s ability to transition from one offering to another or to a registered offering.
The Commission should expand companies’ ability to raise capital through pooled investment funds.
Retail investors should be allowed greater exposure to growth-stage companies through pooled investment funds such as interval funds and other closed-end funds.
The SEC should revise its exemptions governing the secondary trading of securities initially issued in exempt offerings.

Comments on the proposal are due 90 days after publication in the Federal Register .

For more information, click here .

Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships - Release No. 33-10648

Summary - The SEC has adopted a final rule, Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships . This rule includes amendments to the SEC’s auditor independence rules to refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period.

Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the “Loan Provision”) generally provides that an auditor is not independent if that auditor is in a lending relationship with its audit client. In recent years, the SEC has become aware that, in certain circumstances, the existing Loan Provision may not have been functioning as it was intended. Among other things, the amendments:

Focus the analysis on beneficial ownership rather than on both record and beneficial ownership;
Replace the existing 10 percent bright-line shareholder ownership test with a “significant influence” test;
Add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities; and
Exclude from the definition of “audit client,” for a fund under audit, any other funds, that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships.

According to the SEC, the amendments “will more effectively identify debtor-creditor relationships that could impair an auditor’s objectivity and impartiality, as opposed to certain more attenuated relationships that are unlikely to pose such threats, and thus will focus the analysis on those borrowing relationships that are important to investors.”

The amendments are effective 90 days from publication in the Federal Register .

For more information, click here .

SEC Staff Speech - Regulation Best Interest and the Investment Adviser Fiduciary Duty: Two Strong Standards that Protect and Provide Choice for Main Street Investors by Chairman Jay Clayton

Summary - SEC Chairman Jay Clayton recently discussed Regulation Best Interest and the Investment Adviser Fiduciary Duty , two recent SEC standards aimed at protecting and providing choice for Main Street investors. Clayton indicated that these standards represent “a package of rules and interpretations that will enhance the quality and transparency of retail investors’ relationships with broker dealers and investment advisers. Importantly, they bring the legal requirements and mandated disclosures for broker-dealers and investment advisers in line with reasonable investor expectations. These actions do not attempt to favor one type of service or relationship. Rather, they are designed to increase investor protection while preserving access for Main Street investors—both in terms of choice and cost—to a variety of investment services and products.”

For more information, click here .

SEC Staff Views: Staff Statement on LIBOR Transition

Summary - The SEC staff has published a statement that encourages market participants to proactively manage their transition away from LIBOR and outlines several potential areas that may warrant increased attention during that time. It is expected that parties reporting information used to set LIBOR will stop doing so after 2021.

"The transition away from LIBOR is gaining some much needed traction, but, as the staff's statement makes clear, significant work remains," said Chairman Jay Clayton. "The risks the statement highlights deserve careful attention and I draw particular attention to the staff’s observation: 'For many market participants, waiting until all open questions have been answered to begin this important work likely could prove to be too late to accomplish the challenging task required.' The SEC will continue to monitor disclosure and risk management efforts related to the LIBOR transition, and we welcome engagement from market participants on these important matters."

As LIBOR is used extensively in the U.S. and globally as a benchmark rate to set interest rates for various commercial and financial contracts, the SEC staff noted that the “discontinuation of LIBOR could have a significant impact on financial markets and may present a material risk for market participants, including public companies, investment advisers, investment companies, and broker-dealers. These risks will be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner.”

The SEC staff statement encourages market participants to identify existing contracts that extend past 2021 to determine their exposure to LIBOR and to consider whether contracts entered into in the future should reference an alternative rate to LIBOR or include effective fallback language. The statement also contains specific guidance for how registrants might respond to risks associated with the discontinuation of LIBOR.

For more information, click here .

SEC Staff Views: Division of Corporate Finance - Financial Reporting Manual

Summary - The SEC’s Division of Corporation Finance (Corp Fin) has published an updated Financial Reporting Manual (FRM). The FRM represents informal internal guidance from the Corp Fin staff on various accounting topics, financial reporting topics, and SEC rules.

Sections of the FRM have been updated as of July 1, 2019. These sections have been marked with the date tag, “Last updated: 7/1/2019,” to identify the changes. Previous updates are marked using the same convention and represent the last revision to that section. Changes included in this update are:

Section 1610: Removed guidance related to the impact of adopting new accounting standards on selected financial data.
Topic 2, 2020.1: Updated to clarify application of Rule 3-13 and Note 5 to Rule 8-01 of Regulation S-X.
Sections 2030.1, 2030.3: Has been removed. Requests to omit financial statements should be submitted through Rule 3-13 waiver process.
Section 5240: Consolidated information with Note to Topic 2.
Section 10110: Updated revenue threshold for Emerging Growth Companies pursuant to SEC Release 33-10332.
Sections 11100, 11200: Technical amendment to replace references to FASB Accounting Standards Nos. 2014-09 (Revenue from Contracts with Customers (Topic 606)) and 2016-02 (Leases (Topic 842)) with ASC Topics.

For more information, click here .

SEC Staff Speech: Baby on Board - Remarks before the Society for Corporate Governance National Conference by Commissioner Hester M. Peirce

Summary - SEC Commissioner Hester M. Peirce recently discussed the roles women play on corporate Board of Directors. Peirce indicated that the “presence or absence of women on corporate boards has drawn a lot of public and private sector attention recently. This morning, I would like to talk about why all the attention on this issue gives me both concern and hope for the future.”

For more information, click here .

Amendments to Financial Disclosures about Acquired and Disposed Businesses - Release No. 33-10635

Summary - The SEC has proposed rule amendments to improve the information that investors receive regarding the acquisition and disposition of businesses. The proposed amendments are also intended to facilitate more timely access to capital and to reduce complexity and compliance costs of these financial disclosures. The proposal includes amendments to the following rules and related forms for requirements on information related to financial statements of businesses acquired or to be acquired and for business dispositions:

Rule 3-05, Financial statements of businesses acquired or to be acquired;
Rule 3-14, Special instructions for real estate operations to be acquired; and
Article 11 of Regulation S-X.

The SEC also proposed new Rule 6-11 of Regulation S-X and amendments to Form N-14 for financial reporting of acquisitions involving investment companies. Among other things, the proposed amendments would:

Update the significance tests under these rules by revising the investment test and the income test, expanding the use of pro forma financial information in measuring significance, and conforming the significance threshold and tests for a disposed business;
Require the financial statements of the acquired business to cover up to the two most recent fiscal years rather than up to the three most recent fiscal years;
Permit disclosure of financial statements that omit certain expenses for certain acquisitions of a component of an entity;
Clarify when financial statements and pro forma financial information are required;
Permit the use in certain circumstances of, or reconciliation to, International Financial Reporting Standards as issued by the International Accounting Standards Board;
No longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for a complete fiscal year;
Align Rule 3-14 with Rule 3-05 where no unique industry considerations exist;
Clarify the application of Rule 3-14 regarding the determination of significance, the need for interim income statements, special provisions for blind pool offerings, and the scope of the rule’s requirements; and
Amend the pro forma financial information requirements to improve the content and relevance of such information. These improvements would include disclosure of “Transaction Accounting Adjustments,” reflecting the accounting for the transaction and “Managements Adjustments,” reflecting reasonably estimable synergies and transaction effects.

The proposal will have a 60-day public comment period following its publication in the Federal Register .

For more information, click here .

Proposed Rule Amendments and Guidance Addressing Cross-Border Application of Certain Security-Based Swap Requirements - Release No. 34-85823

Summary - The SEC has issued for public comment a package of rule amendments and interpretive guidance to improve the framework for regulating cross-border security-based swaps transactions and market participants.

The proposals are intended to improve the regulatory framework by pragmatically addressing implementation issues and efficiency concerns, and in some cases further harmonizing the regulatory regime governing security-based swaps administered by the Commission with the regulatory regime governing swaps administered by the Commodity Futures Trading Commission.

The proposing release addresses four key areas:

The use of transactions that have been “arranged, negotiated, or executed” by personnel located in the United States as a trigger for regulating security-based swaps and market participants;
The requirement that non-U.S. resident security-based swap dealers and major security-based swap participants certify and provide an opinion of counsel that the SEC can access their books and records and conduct onsite inspections and examinations;
The cross-border application of statutory disqualification provisions; and
The questionnaires or employment applications that security-based swap dealers and major security-based swap participants must maintain with regard to their foreign associated persons

The accompanying fact sheet describes each of these aspects in more detail.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register .

For more information, click here .

Amendments to the Accelerated Filer and Large Accelerated Filer Definitions - Release No. 34-85814

Summary - The SEC voted to propose amendments to the accelerated filer and large accelerated filer definitions. The SEC believes the proposed amendments would reduce costs for certain lower-revenue companies by more appropriately tailoring the types of companies that are categorized as accelerated and large accelerated filers while maintaining effective investor protections.

The proposed amendments would:

Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had no revenues or annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available;
Increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million; and
Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status.

The proposed amendments would not change key protections from the Sarbanes-Oxley Act of 2002, such as independent audit committee requirements, CEO and CFO certifications of financial reports, or the requirement that companies continue to establish, maintain, and assess the effectiveness of their ICFR.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register .

For more information, click here .

SEC Approves PCAOB Amendments to Auditing Standards for Auditor's Use of the Work of Specialists

Summary - The SEC has approved the PCAOB’s amendments to auditing standards for using the work of specialists. The amendments are intended to strengthen the requirements that apply when auditors use the work of specialists in an audit.

These amendments are effective for audits of financial statements for fiscal years ending on or after December 15, 2020. The SEC rejected a phased-in approach to the effective date that was recommended by some commenters.

For more information, click here .

SEC Approves PCAOB Auditing Standard 2501

Summary - The SEC has approved the PCAOB’s Auditing Standard No. 2501, Auditing Accounting Estimates, Including Fair Value Measurements . AS 2501 includes a single standard that replaces the accounting estimates standard, the fair value standard, and the derivatives standard. The standard also includes a special topics appendix that addresses certain matters relevant to auditing the fair value of financial instruments.

AS 2501 is effective for audits of financial statements for fiscal years ending on or after December 15, 2020. The SEC rejected a phased-in approach to the effective date that was recommended by some commenters.

For more information, click here .

Tax Updates

Employer Credit for Paid Family and Medical Leave

Employers may receive a tax credit for family and medical leave paid during taxable years beginning after December 31, 2017 and before December 31, 2019 if certain requirements are met.

Under the regular tax law, a corporation employer may get a tax saving of $21 for every $100 paid to an employee. With the new business credit, if a corporation employer pays $100 to a qualifying employee for his or her family and medical leave, and if the other requirements are met, such employer can get a tax saving of $30.875 to $35.5.

To claim such a credit, the employer must have a written policy in place with provisions that (1) at least two weeks of paid family and medical leave is available to all full time qualifying employees, and (2) the paid leave is not less than 50% of the normal wage of the employee. Qualifying employees are those who have been employed by the employer for at least one year and whose compensation is less than $72,000 (for tax year 2018).

If you would like to learn more about this new credit, please contact Nicole Zhao.

Extra Crunch

IASB Proposes to Update Conceptual Framework Reference in IFRS 3

Summary - The International Accounting Standards Board (IASB) has published for public consultation proposed narrow-scope amendments to IFRS 3, Business Combinations . The amendments update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. Comments are due by September 27, 2019.

IFRS 3 specifies how a company should account for the assets and liabilities it acquires when it obtains control of a business. It refers companies to the IASB’s Conceptual Framework to determine what constitutes an asset or a liability.

IFRS 3 refers to an old version of the Conceptual Framework. The IASB proposes to update IFRS 3 so it refers instead to the latest version, issued in March 2018.

Updating the reference without making any other changes to IFRS 3 could change the accounting requirements for business combinations because the liability definition in the 2018 Conceptual Framework is broader than that in previous versions. Companies would need to record provisions and contingent liabilities when they acquire a business they would not record in other circumstances. To avoid this, the IASB also proposes that for provisions and contingent liabilities, companies refer to IAS 37, Provisions, Contingent Liabilities and Contingent Assets instead of the Conceptual Framework to determine what constitutes a liability.

This change is proposed to stand until the IASB decides whether and how to amend IAS 37 to align it with the 2018 Conceptual Framework.

For more information, please click here .

Single Audits - AICPA Publishes New Edition of Audit and Accounting Guide

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, Government Auditing Standards and Single Audits . This new edition presents guidance for the audits of financial statements conducted in accordance with Government Auditing Standards , 2011 Revision (also referred to as the Yellow Book), issued by the Comptroller General of the United States of the U.S. Government Accountability Office.

This edition also presents the recommendations of the AICPA Single Audit Working Group for the conduct of audits in accordance with the Single Audit Act and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards .

For more information, please click here .

State and Local Governments - AICPA Publishes New Edition of Audit and Accounting Guide

Summary - The AICPA has published a new edition of its Audit and Accounting Guide, State and Local Governments . This new edition has been developed by the AICPA State and Local Government Audit Guide Revision Task Force (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.

For more information, please click here .

Digital Assets - Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities Published

Summary - Market participants have raised questions concerning the application of the federal securities laws and the rules of the Financial Industry Regulatory Authority (“FINRA”) to the potential intermediation of digital asset securities and transactions. The staffs of the Division of Trading and Markets and FINRA have issued a joint statement that articulates various considerations relevant to many of these questions, particularly under the SEC’s Customer Protection Rule applicable to SEC registered broker-dealers.

For more information, please click here .

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