February 2021: Latest SEC, FASB & Tax Updates & COVID-19 Related Updates from the SEC, IRS, Etc.

We are pleased to release MaloneBailey's February 2021 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

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COVID Related Updates

COVID-19 – PCAOB Publishes Spotlight on Insights and Reminders for Auditors in Light of COVID-19
COVID-19 – AICPA Publishes GAQC Summary of COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports
COVID-19 – GAQC Alert Published
SEC Staff Speech, Staff Statement Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns

Recent FASB & AICPA Updates

Intangible Assets – FASB Discusses Identifiable Intangible Assets and Goodwill
Goodwill – FASB Discusses Interim Goodwill Evaluation
International Accounting – FASB and IASB Hold Educational Meeting
Lease Standard – IASB Proposes Amendments to its Leases Standard
Mergers and Acquisitions – IASB Consults on New Accounting Requirements for Mergers and Acquisitions in a Group
Employee Benefit Plans – 2020 Edition of Audit and Accounting Guide Published
Leases – FASB Discusses Post-Implementation Review of ASU 2016-02
IASB Post-Implementation Review – IASB Publishes Post-Implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities
Review Engagements – AICPA Issues SSAE 22 on Review Engagements
Revenue Recognition – FASB Proposes Improvements to Accounting for Acquired Revenue Contracts with Customers in a Business Combination
Reference Rate Reform – FASB Discusses Scope of Topic 848

Recent SEC & PCAOB Updates

Estimates and Specialists – PCAOB Provides Resource for Audit Committees on Estimates and Specialists
PCAOB Standard Setting – PCAOB Releases Spotlight on the Use of Economic Analysis and Stakeholder Input
Securities Act – SEC Staff Updates Compliance and Disclosure Interpretation on Securities Act
Auditor Independence – SEC Publishes PCAOB Proposed Amendments to Interim Independence Standards and PCAOB Rules to Align with Amendments to Rule 2-01 of Regulation S-X
Release No. 33-10902: Adoption of Updated EDGAR Filer Manual, Proposed Collection and Comment Request
Release No. 33-10901: Administration of the Electronic Data Gathering, Analysis, and Retrieval System
Release No. 33-10890: Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information
Release No. 34-90442: Amendments to the Commission’s Rules of Practice
Release No.33-10889: Electronic Signatures in Regulation S-T Rule 302
Release No. 34-90680: Order Recognizing the Resource Extraction Payment Disclosure Requirements of the European Union, the United Kingdom, Norway, and Canada as Alternative Reporting Regimes that Satisfy the Transparency Objectives of Section 13(q) under the Securities Exchange Act of 1934
SEC Staff Speech, Division of Corporation Finance - CF Disclosure Guidance Official Text
SEC Staff Speech, AICPA National Conference on Current SEC and PCAOB Developments - 2020
SEC Staff Speech, Statement on Developments Related to the LIBOR Transition by Chairman Jay Clayton
SEC Staff Speech, Topic No. 10: Disclosure Considerations for China-Based Issuers
SEC Staff Speech, The Regulation of Corporation Finance – A Principles-Based Approach by William Hinman Director, Division of Corporation Finance
SEC Staff Speech, Staff Statement Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns
SEC Staff Speech, Transitional FAQs Regarding Amended Regulation S-K Items 101, 103 and 105
SEC Staff Speech, Modernization of Regulation S-K Items 101, 103, and 105 a Small Entity Compliance Guide
Release No. 33-10911: Rule 144 Holding Period and Form 144 Filings
Release No. 34-90788: Custody of Digital Asset Securities by Special Purpose Broker-Dealers
Release No: 33-10891: Modernization of Rules and Forms for Compensatory Securities Offerings and Sales

Tax Updates

Consolidated Appropriations Act 2021 – (NEW COVID RELIEF PACKAGE)

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COVID-19 Related Updates

COVID-19 – PCAOB Publishes Spotlight on Insights and Reminders for Auditors in Light of COVID-19

Summary - The PCAOB has released a Spotlight publication, Staff Observations and Reminders during the COVID-19 Pandemic. This publication provides a summary of insights from recent PCAOB inspections of reviews of interim financial information and audits. This publication builds on information provided in the PCAOB’s previously published Spotlight, COVID-19: Reminders for Audits Nearing Completion. The publication provides various observations and includes several reminders or key takeaways.

The PCAOB indicates that despite “the ongoing challenges created by the pandemic, auditors remain responsible for conducting audits in accordance with PCAOB standards and rules, as well as other regulatory and professional standards. Although the staff observations in this publication relate to audits of public companies, many of the reminders, even where the term “public company” is used, may also be applicable to audits of broker-dealers.”

For more information, click here.

COVID-19 – AICPA Publishes GAQC Summary of COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports

Summary - The AICPA has published the Governmental Audit Quality Center’s Summary of COVID-19 Related Deadline Extensions of Audited Financial Statements and Other Reports. This resource provides a summary of extension documents issued by respective Federal agencies in response to COVID-19.

For more information, click here.

COVID-19 – GAQC Alert Published

Summary - The AICPA has published GAQC Alert No. 419 that discusses the long-awaited Addendum to the 2020 Office of Management and Budget (OMB) Compliance Supplement (the Supplement addendum), which was just released and discusses Congress’s action on the new COVID-19 Relief Bill.

For more information, click here.

SEC Staff Speech, Staff Statement Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns

Summary - Corp Fin, the Division of Investment Management, and the Division of Trading and Markets has received inquiries from persons and entities subject to Regulation S-T regarding the authentication document retention requirements under Rule 302(b) in light of health, transportation, and other logistical issues raised by the spread of COVID-19. Rule 302(b) of Regulation S-T requires that each signatory to documents electronically filed with the SEC under the federal securities laws “manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing.” Such documents must be executed before or at the time the electronic filing is made.

Given the public health and safety concerns related to COVID-19, the staff is providing the following statement to those affected by COVID-19 regarding Rule 302(b) of Regulation S-T. This staff statement is temporary and remains in effect until the staff provides public notice that it no longer will be in effect; that notice will be published at least two weeks before the announced termination date.

For more information, click here.

Recent FASB & AICPA Updates

Intangible Assets – FASB Discusses Identifiable Intangible Assets and Goodwill

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on November 11, 2020, and discussed the FASB staff’s research and analysis on amortization periods and methods for an impairment-with-amortization model for the subsequent accounting for goodwill, as well as evolving models in which the subsequent accounting for goodwill changes over time. The meeting was educational and no decisions were made.

The FASB also discussed the feedback from comment letter respondents on several issues related to proposed FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting—Chapter 7, Presentation. The FASB decided that:

Distinguishing between revenues and gains and expenses and losses should be addressed in the elements chapter of the conceptual framework.
No additional aggregation factors for grouping line items need to be included in the chapter. For certain factors, clarifying modifications need to be made.
The decision that there is no conceptual basis for other comprehensive income should be retained.
No additional detail should be added about the articulation and relationship between financial statements.

For more information, click here.

Goodwill – FASB Discusses Interim Goodwill Evaluation

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on November 18, 2020, and discussed an issue related to the cost and complexity of private companies performing an interim goodwill triggering event evaluation. The FASB decided to:

Add a project to its technical agenda to address the cost and complexity associated with interim goodwill impairment testing for private companies and not-for-profit entities.
Introduce an accounting alternative that would allow entities within the scope of the guidance to perform a goodwill triggering event evaluation on the annual reporting date only.
Limit the scope of the alternative to entities that meet the definition of private companies and not-for-profit entities as those terms are defined in the Codification’s Master Glossary.
Limit the scope of the alternative to entities that report GAAP-compliant financial statements on an annual basis only.
Limit the scope of the alternative to goodwill that is tested for impairment in accordance with Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill.
Not limit the guidance to a specified time period but instead make it available on an ongoing basis.
Require no additional disclosures beyond the current requirements in Topic 235, Notes to Financial Statements, and Subtopic 350-20.

For more information, click here.

International Accounting – FASB and IASB Hold Educational Meeting

Summary - As reported in its “Summary of Board Decisions” publication, the FASB and IASB met on November 19, 2020, for an educational session and discussed the following topics:

IASB project on Goodwill and Impairment/FASB project on Identifiable Intangible Assets and the Subsequent Accounting for Goodwill;
Leases;
Responding to the Covid-19 crisis; and
Supply Chain Financing.

No decisions were made.

For more information, click here.

Lease Standard – IASB Proposes Amendments to its Leases Standard

Summary - The IASB proposes to amend IFRS No. 16, Leases, by specifying how a company measures the lease liability in a sale and leaseback transaction. Sale and leaseback transactions are transactions for which a company sells an asset and leases that same asset back from the new owner. IFRS 16 includes requirements for how to account for sale and leaseback transactions at the time the transaction takes place. However, it does not specify how to measure the lease liability when reporting after that date.

The proposed amendment improves the sale and leaseback requirements already in IFRS 16 by providing greater clarity for the company selling and leasing back an asset both at the date of transaction and subsequently. By doing so, the amendment helps ensure the Standard is applied consistently to such transactions.

The proposed amendment does not change the accounting for leases other than those arising in a sale and leaseback transaction. The Exposure Draft, Lease Liability in a Sale and Leaseback, is open for public comment until March 29, 2021.

For more information, click here.

Mergers and Acquisitions – IASB Consults on New Accounting Requirements for Mergers and Acquisitions in a Group

Summary - The International Accounting Standards Board (IASB) has launched a public consultation on possible new accounting requirements for mergers and acquisitions involving companies within the same group, business combinations under common control.

International Financial Reporting Standards (IFRS) No. 3, Business Combinations, set out reporting requirements for mergers and acquisitions, referred to as business combinations. However, IFRS 3 does not specify how to report transactions that involve transfers of businesses between companies within the same group. Such transactions are common in many countries around the world.

As a result of this gap in IFRS, companies report similar business combinations in different ways. In some cases, they provide fair-value information about the acquired company and in other cases, they provide book-value information. Moreover, book-value information is provided in various ways and is often insufficient. This diversity in practice makes it difficult for investors to understand the effects of such transactions on companies that undertake them and to compare companies that undertake similar transactions.

The Discussion Paper, Business Combinations under Common Control, sets out the IASB’s preliminary views on how to fill this gap in IFRS. The IASB’s aim is to reduce diversity in practice and to improve transparency and comparability in reporting these transactions.

The IASB’s view is that companies should provide similar information about similar business combinations when the benefits of that information to investors outweigh the costs of providing it. Specifically, the IASB is suggesting that fair-value information should be provided when a business combination under common control affects shareholders outside the group. That suggestion is consistent with the existing requirements in IFRS 3 for mergers and acquisitions between unrelated companies. In all other cases, the IASB is suggesting that book-value information should be provided using a single approach to be specified in IFRS.

The Discussion Paper seeks feedback on the IASB’s preliminary views on when and how each approach should be applied. The comment deadline is September 1, 2021.

For more information, click here.

Employee Benefit Plans – 2020 Edition of Audit and Accounting Guide Published

Summary - The AICPA has published the 2020 edition of Audit and Accounting Guide, Employee Benefit Plans. This guide has been developed by the AICPA Employee Benefit Plans Expert Panel, the Guide Overhaul Task Force and the Employee Benefit Plans Guide Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management of employee benefit plans in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

This edition of the guide has been modified by the AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued, and other revisions as deemed appropriate. Relevant guidance issued through August 1, 2020, has been considered in the development of this edition of the guide.

For more information, click here.

Leases – FASB Discusses Post-Implementation Review of ASU 2016-02

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on December 2, 2020, and discussed feedback received to date during the post-implementation review (PIR) of FASB Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The staff provided the FASB with a report of its activities as part of the PIR process and summarized feedback received to date based on its outreach meetings with financial statement users, agenda requests, and the September 2020 public Leases Roundtable.

While no technical decisions were made, the FASB staff discussed feedback related to the importance of leasing information to financial statement users, the lessee’s application of the incremental borrowing rate and nonpublic lessee’s application of the risk-free rate, embedded leases, lease modifications, allocation of lease payments, and other ancillary issues. The FASB staff will perform additional research and outreach on the practical expedient that allows nonpublic lessees to use the risk-free rate as the lease discount rate. Specifically, the FASB staff’s research will consider the appropriateness of the risk-free rate and whether the practical expedient should be applied at the underlying class of asset level rather than at an entity-wide level. That research is expected to be considered at a future date as part of agenda request activities. The FASB staff will also consider providing additional educational materials to clarify some aspects of Topic 842 for certain groups of stakeholders. The FASB staff will continue to perform general outreach with stakeholders and continue to accumulate their feedback for presentation to the FASB at future meetings.

The FASB also discussed feedback received to date during the post-implementation review (PIR) of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB staff provided the board with a report of the its activities as part of the PIR process and summarized feedback received to date based on its direct outreach with stakeholders and monitoring of publicly available information.

While no technical decisions were made, the FASB staff discussed feedback related to areas such as purchased financial assets that do not qualify for purchased financial assets with credit deteriorated (PCD) accounting treatment, the accounting and disclosure of troubled debt restructurings (TDRs), scope of financial assets included in Update 2016-13 (including trade receivables), and disclosures. The FASB staff will perform additional research and outreach on the accounting for non-PCD financial assets and TDRs to be considered at a future date as part of agenda request activities. In addition, the FASB staff will continue to monitor feedback related to the scope of financial assets included in and disclosures under Update 2016-13. The FASB staff also will continue to perform general outreach with stakeholders and continue to accumulate their feedback for presentation to the FASB at future meetings. This will include continuing dialogue seeking feedback from prudential regulators.

For more information, click here.

IASB Post-Implementation Review – IASB Publishes Post-Implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities

Summary - The IASB has issued a Request for Information for feedback on the International Financial Reporting Standards (IFRS) for group accounting, IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; and IFRS 12, Disclosure of Interests in Other Entities. The IASB published the Request for Information as part of the Post-implementation Review (PIR) of these IFRSs. The comment deadline is May 10, 2021.

The IFRS conducts PIRs to assess the effects of a new IFRS after companies have applied the requirements for some time.

IFRS 10 sets out requirements for the preparation of group, consolidated, financial statements; IFRS 11 addresses how to account for interests in joint arrangements; and IFRS 12 sets out the information to be disclosed in the notes to the financial statements about interests in other companies.

These IFRS Standards have been effective for annual reporting periods beginning on or after January 1, 2013.

The Request for Information seeks feedback on applying the standards and on the information provided to users of financial statements. The IASB will use the feedback on the Request for Information to determine whether any further action is required. In addition, the IASB plans to host webinars to discuss the PIR.

For more information, click here.

Review Engagements – AICPA Issues SSAE 22 on Review Engagements

Summary - The AICPA’s Auditing Standards Board (ASB) has issued Statement on Standards for Attestation Engagements (SSAE) No. 22, Review Engagements. The new SSAE provides performance and reporting requirements and application guidance for review engagements performed in accordance with the attestation standards.

Objectives of a Review Engagement

The practitioner’s objectives with respect to a review engagement are to:

Offer limited assurance about whether material modifications should be made to the subject matter for it to be in accordance with or based on the criteria;
Express a conclusion in a written report about whether the practitioner is aware of any material modifications that need to be made to the subject matter for it to be in accordance with the criteria or the responsible party’s assertion so that it is fairly stated; and
Communicate further as required by relevant AT-C provisions.

For purposes of SSAE 22 and the review engagement requirements, the term “subject matter” “encompasses the terms underlying subject matter and subject matter information, as defined in AT-C section 105. If only one of these terms is applicable, that term is used.”

SSAE 22

SSAE 22 supersedes SSAE 18, Attestation Standards: Clarification and Recodification, Section 210 of the same title. The requirements and guidance in SSAE 22 supplement those of AT-C Section 105, Concepts Common to All Attestation Engagements. As noted in the ASB’s accompanying At a Glance document, Revisions to Attestation Review Standard for Clarity on Procedures That May Be Performed, Report Transparency, and Consistency with Other Professional Standards, SSAE 22 “revises AT-C section 210 for consistency with AT-C section 205, Assertion-Based Examination Engagements (pursuant to SSAE No. 21, Direct Examination Engagements)....”

SSAE 22 also:

Describes the procedures that may be performed in a review agreement;
Specifies requirements that must be met in the practitioner’s report, including an informative summary of the work performed as a basis for the conclusion; and
Permits the practitioner to express an adverse conclusion.

The ASB expects the enhancements in SSAE 22 will provide “helpful information to users of the review reports by explaining the nature of the work done in the review.” It also believes that permitting practitioners to provide the user with an adverse conclusion where necessary so that the user is aware of material misstatements as well as the effects of the misstatements is in the public interest.

Effective Dates

SSAE 22 is effective for practitioners’ review reports dated on or after June 15, 2022. Early implementation is permitted only if the practitioner also implements early the amendments to AT-C Section 105 included in SSAE 21.

For more information on specific disclosure requirements deleted and added, click here.

Revenue Recognition – FASB Proposes Improvements to Accounting for Acquired Revenue Contracts with Customers in a Business Combination

Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to address inconsistency and diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination. Stakeholders are encouraged to review and share input on the proposed ASU by March 15, 2021.

Current GAAP provides guidance on when to recognize and how to measure assets and liabilities in a business combination but does not provide guidance specific to contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Topic 606, Revenue from Contracts with Customers.

Some stakeholders indicated that it is unclear how an acquirer should evaluate whether to recognize a contract liability from a revenue contract with a customer acquired in a business combination after Topic 606 is adopted. Furthermore, it was identified that under current practice, the timing of payment (payment terms) of a revenue contract may subsequently affect the post-acquisition revenue recognized by the acquirer.

The proposed ASU would address these issues by providing guidance in Topic 805, Business Combinations, that would require an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. Generally, this would result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements before the acquisition. The proposed ASU would not affect the accounting for other assets or liabilities that may arise from revenue contracts from customers in a business combination, such as customer-related intangible assets and contract-based intangible assets.

For more information, click here.

Reference Rate Reform – FASB Discusses Scope of Topic 848

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on December 9, 2020 and discussed comment letter feedback received on its proposed ASU, Reference Rate Reform (Topic 848): Scope Refinement.

For more information, click here.

Recent SEC & PCAOB Updates

Estimates and Specialists – PCAOB Provides Resource for Audit Committees on Estimates and Specialists

Summary - The Public Company Accounting Oversight Board (PCAOB) has published a resource for audit committees on its new requirements related to auditing accounting estimates, including fair value measurements and using the work of specialists. The requirements will take effect for audits of financial statements for fiscal years ending on or after December 15, 2020.

To help audit committees enhance their understanding in this area, this resource provides the basics of the new requirements, key takeaways for audit committees, and questions to consider asking auditors.

Key takeaways for audit committees include:

The effects of the new requirements will not be uniform across all audits;
The extent of effects of the new requirements will depend on the nature and extent of accounting estimates included in the company’s financial statements, and also on whether the company uses a specialist;
The new standard and amendments do not change the requirements for the auditor’s communications with audit committees, including those communications related to critical accounting estimates; and
Auditors are applying these new requirements in extraordinary times and in situations that continue to evolve due to the COVID-19 pandemic.

The PCAOB intends these resources to be informative and useful to audit committee members. The PCAOB also expressed the intention to enhance engagement and a commitment to proactively and directly communicate with audit committee members.

The PCAOB also requests that stakeholders contact Stakeholder Liaison Erin Dwyer with feedback on this resource or to request further engagement with the PCAOB.

For more information, click here.

PCAOB Standard Setting – PCAOB Releases Spotlight on the Use of Economic Analysis and Stakeholder Input

Summary - The PCAOB has released the Spotlight publication, The PCAOB’s Use of Economic Analysis and Stakeholder Input in Standard Setting.

The Spotlight highlights how the PCAOB implements its strategic objective of better leveraging economic and risk analysis to effectively set standards, rules, and guidance. It provides an overview of how it conducts economic analysis and gathers stakeholder input. The Spotlight also includes a mini case study on how the PCAOB has used, and will continue to use, economic analysis and stakeholder input related to the requirement for auditors to determine and communicate critical audit matters in the auditor’s report.

The Spotlight explains that before issuing a new or revised standard, the PCAOB seeks input from relevant stakeholders and perform an economic analysis. This process includes:

Describing the need for the standard or rule;
Developing the baseline and measuring for the impacts of the rule or standard;
Considering reasonable alternatives; and
Analyzing the economic impacts of the standard and alternatives.

The PCAOB continues its economic analysis after the adoption of new or revised standards and approval by the SEC, including by conducting a post-implementation review.

For more information, click here.

Securities Act – SEC Staff Updates Compliance and Disclosure Interpretation on Securities Act

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated the Compliance and Disclosure Interpretation (C&DI), Securities Act Sections. Corp Fin has updated question 139.13 and withdrawn questions 139.15 -139.20. This C&DI provides guidance from Corp Fin on aspects of sections under the Securities Act of 1933.

Corp Fin has updated this C&DI to provide updated guidance on when a company may file a registration statement for the resale by the investors of securities sold in a private equity line financing. The questions withdrawn generally provided guidance on Securities Act Section 5.

For more information, click here.

Auditor Independence – SEC Publishes PCAOB Proposed Amendments to Interim Independence Standards and PCAOB Rules to Align with Amendments to Rule 2-01 of Regulation S-X

Summary - The SEC has published for public comment a Notice of Filing of Proposed Rules on Amendments to PCAOB Interim Independence Standards and PCAOB Rules to Align with Amendments to Rule 2-01 of Regulation S-X. On November 20, 2020, the PCAOB filed with the SEC proposed rule changes to its interim independence standards and proposed rules to align with amendments to Rule 2-01 of Regulation S-X. The SEC is publishing this notice to solicit comments on the proposed rules from interested persons.

Comments on the notice should be provided within 21 days from publication of the notice in the Federal Register.

For more information, click here.

Release No. 33-10902: Adoption of Updated EDGAR Filer Manual, Proposed Collection and Comment Request

Summary - The SEC adopted revisions to Volumes I and II of the EDGAR Filer Manual and related rules. The revisions substantially reduce the length of Volume I, and amend Volume I and related rules under Regulation S-T, including provisions regarding electronic notarizations and remote online notarizations, which include electronic signatures. The revisions to Volume II reflect changes made to EDGAR on December 14, 2020. The SEC is also providing notice and soliciting comments on the Form ID collection of information pursuant to the Paperwork Reduction Act of 1995.

For more information, click here.

Release No. 33-10901: Administration of the Electronic Data Gathering, Analysis, and Retrieval System

Summary - The SEC adopted a new rule that specifies several actions that the agency, in its administration of the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR), may take to promote the reliability and integrity of EDGAR submissions. The new rule establishes a process for the SEC to notify filers and other relevant persons of its actions under the rule as soon as reasonably practicable.

In addition, the SEC adopted amendments to delegate authority to the Director of the Commission’s EDGAR Business Office to take actions pursuant to the new rule and two current rules relating to filing date adjustments and the continuing hardship exemption.

For more information, click here.

Release No. 33-10890: Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information

Summary - The SEC has adopted amendments that will modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. The amendments are intended to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants.

The amendments make changes to Items 301 (Selected Financial Data), 302 (Supplementary Financial Information), and 303 (Management’s Discussion and Analysis (MD&A)) of Regulation S-K. The amendments eliminate Item 301 that previously required selected financial data. The amendments also modernize, simplify, and streamline Item 302(a) which provides requirements for supplementary financial information. The amendments revise Item 302(a) to replace the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes.

The amendments make significant changes to MD&A under Item 303, including:

Adds a new Item 303(a), Objective, to state the principal objectives of MD&A;
Amends current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;
Amends current Item 303(a)(3) (amended Item 303(b)(2)) to clarify, modernize and streamline disclosure requirements for results of operations;
Adds a new Item 303(b)(3), Critical accounting estimates, to clarify and codify SEC guidance on critical accounting estimates;
Replaces current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A;
Eliminates current Item 303(a)(5), Tabular disclosure of contractual obligations, in light of the amended disclosure requirements for liquidity and capital resources and certain overlap with information required in the financial statements; and
Amends current Item 303(b), Interim periods (amended Item 303(c)) to modernize, clarify and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles.

In addition, the SEC adopted certain parallel amendments to the financial disclosure requirements applicable to foreign private issuers, including to Forms 20-F and 40-F, as well as other conforming amendments to the SEC's rules and forms, as appropriate.

The amendments will become effective 30 days after they are published in the Federal Register. Registrants are required to comply with the rule beginning with the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register (the "mandatory compliance date"). Registrants will be required to apply the amended rules in a registration statement and prospectus that on its initial filing date is required to contain financial statements for a period on or after the mandatory compliance date.

Although registrants will not be required to apply the amended rules until their mandatory compliance date, they may comply with the final amendments any time after the effective date, so long as they provide disclosure responsive to an amended item in its entirety.

For more information, click here.

Release No. 34-90442: Amendments to the Commission’s Rules of Practice

Summary - The SEC voted to adopt rules and rule amendments that will “provide additional flexibility in connection with documents filed with the Commission by permitting the use of electronic signatures in authentication documents, and facilitate electronic service and filing in the Commission's administrative proceedings.” The SEC indicates that these new rules and amendments are part of a series of initiatives designed to modernize and strengthen the agency's operations.

The SEC adopted rule amendments to require electronic filing and service of documents in administrative proceedings. These rule amendments also require redaction of sensitive personal information from many of these documents before filing with the SEC.

These amendments will become effective 30 days after publication of the adopting release in the Federal Register. However, compliance will not be required until April 12, 2021, and there will be an initial 90-day phase-in period following the compliance date.

For more information, click here.

Release No.33-10889: Electronic Signatures in Regulation S-T Rule 302

The SEC adopted rule amendments to permit the use of electronic signatures when executing authentication documents in connection with many documents filed with the SEC. Rule 302(b) of Regulation S-T currently requires that each signatory to an electronic filing manually sign a signature page or other document ("authentication document") before or at the time of the electronic filing to authenticate the signature that appears in typed form within the electronic filing.

The SEC amendments permit a signatory to an electronic filing who follows certain procedures to sign an authentication document through an electronic signature that meets certain requirements specified in the EDGAR Filer Manual. In addition, the SEC amended certain rules and forms under the Securities Act, Exchange Act, and Investment Company Act to allow the use of electronic signatures in authentication documents in connection with certain other filings when these filings contain typed, rather than manual, signatures. The SEC indicates that these amendments “recognize the widespread use of electronic signatures and technological developments in the authentication and security of electronic signatures, as well as the continuing need to support remote workforces, and follow a rulemaking petition joined by nearly 100 public companies.”

The rule amendments will be effective upon publication of the adopting release in the Federal Register.

For more information, click here.

Release No. 34-90680: Order Recognizing the Resource Extraction Payment Disclosure Requirements of the European Union, the United Kingdom, Norway, and Canada as Alternative Reporting Regimes that Satisfy the Transparency Objectives of Section 13(q) under the Securities Exchange Act of 1934

Summary - The SEC has issued an order in conjunction with issuance of new resource extraction payment rules. The order recognizes the resource extraction payment disclosure requirements of the European Union, the United Kingdom, Norway, and Canada as alternative reporting regimes that satisfy the transparency objectives of section 13(q) under the Securities Exchange Act of 1934.

The SEC adopted final rules that will require resource extraction issuers that are required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas, or minerals.

The final rules will be effective 60 days following publication in the Federal Register.

For more information, click here.

SEC Staff Speech, Division of Corporation Finance - CF Disclosure Guidance Official Text

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published CF Disclosure Topic No. 11, Special Purpose Acquisition Companies. This guidance provides Corp Fin’s views about certain disclosure considerations for special purpose acquisition companies, commonly referred to as SPACs, in connection with their initial public offerings and subsequent business combination transactions. Topics discussed in this guidance include disclosure considerations for a SPAC involving an Initial Public Offering and a business combination transaction.

For more information, click here.

SEC Staff Speech, AICPA National Conference on Current SEC and PCAOB Developments - 2020

Summary - On December 7-9, 2020, representatives of the SEC, FASB, PCAOB, IASB, and AICPA spoke at the annual AICPA Conference on Current SEC and PCAOB Developments. This years’ conference was held virtually. Topics discussed during the 2020 conference covered a number of important financial reporting and auditing issues. Principal themes of the conference included:

The importance of transparency and integrity on financial reporting, including the role of the auditor in providing assurance and trust in the financial reports of entities;
Accounting, financial reporting, and auditing responses to the COVID-19 global pandemic;
Disclosures on economic, social, or governance matters (integrated or sustainability reporting);
The importance of internal control over financial reporting (ICFR), including the designing and implementation of controls, and the important role of auditors have in testing the effectiveness of ICFR;
PCAOB standard-setting, inspection, and enforcement; and
Implementation of important new accounting and audit requirements, including accounting standards on leases, credit losses, and LIBOR, and the PCAOB’s Critical Audit Matters requirements.

For more information, click here.

SEC Staff Speech, Statement on Developments Related to the LIBOR Transition by Chairman Jay Clayton

Summary - SEC Chairman Jay Clayton released a brief statement on developments related to LIBOR transition. Specifically, the U.S. Federal Reserve and U.K regulators announced that it is urging banks to wrap up contracts using LIBOR. In response, Clayton indicates that the “announcements establish a pragmatic, market-oriented path for managing the transition away from LIBOR. We encourage registrants to proactively transition to market-based reference rates and stand ready to assist market participants.”

For more information, click here.

SEC Staff Speech, Topic No. 10: Disclosure Considerations for China-Based Issuers

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published CF Disclosure Topic No. 10, Disclosure Considerations for China-Based Issuers. This guidance provides Corp Fin’s views regarding certain disclosure considerations for companies based in or with the majority of their operations in the People’s Republic of China (“PRC” or “China”). Topics discussed in this guidance include:

Risks Associated with China-based Issuers;
Differences in Shareholder Rights and Recourse, Governance, and Reporting Associated with China-based Issuers; and
Disclosure Considerations for China-based Issuers.

For more information, click here.

SEC Staff Speech, The Regulation of Corporation Finance – A Principles-Based Approach by William Hinman Director, Division of Corporation Finance

Summary - William Hinman, SEC Director of Corp Fin, recently discussed rulemaking around new digital assets or other areas of financial reporting. Hinman indicated that “the Commission’s principles-based approach to disclosure can be applied to new, complex and evolving situations. Significant examples include Brexit, the upcoming LIBOR transition, cybersecurity developments, climate change, and most recently, the global coronavirus (COVID-19) pandemic we are battling today.”

Hinman’s remarks focused on:

Digital assets;
Principles-based disclosure and rulemaking; and
Corporate hygiene and what should be disclosed.

Regarding corporate disclosures, Hinman indicated that “thoughtful and proactive compliance with the federal securities laws, particularly our laws and rules around trading in company securities and corporate disclosure, is not a bad first step as companies set out on the path of defining their proper purpose as corporate citizens. The importance of good disclosure to the broader markets and the public cannot be overstated. Disclosure that is specific and tailored to a company’s circumstances, that is well-vetted by accounting, legal and financial gatekeepers, provides everyone with information that can be trusted and acted on with confidence. The disclosure that companies make in their Commission filings is special in no small part because it is vetted by gatekeepers, subject to potential staff review and, of course, subject to the liability standards of the federal securities laws. These processes and rigor add credibility and weight to statements made in a report or document filed with the Commission.”

For more information, click here.

SEC Staff Speech, Transitional FAQs Regarding Amended Regulation S-K Items 101, 103 and 105

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published Transitional FAQs Regarding Amended Regulation S-K Items 101, 103 and 105. This document provides guidance on the disclosure requirements and related rules adopted in the Modernization of Regulation S-K Items 101, 103, and 105 rulemaking (Securities Act Release No. 33-10825). These previously adopted amendments modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. Corp Fin’s guidance provides views on transition to these new rules which are effective on November 9, 2020.

For more information, click here.

SEC Staff Speech, Modernization of Regulation S-K Items 101, 103, and 105 a Small Entity Compliance Guide

Summary - The SEC staff has published Modernization of Regulation S-K Items 101, 103, and 105 A Small Entity Compliance Guide. This guide provides guidance on the SEC’s amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The amendments the SEC adopted update these items to reflect the many changes in our capital markets and the domestic and global economy in recent decades. The amendments to Regulation S-K Items 101, 103, and 105 are intended to elicit improved disclosures for investors and add efficiencies to the compliance efforts of registrants.

The amendments are also intended to improve the readability of disclosure documents, as well as discourage repetition and reduce the disclosure of unnecessary information.

This guide covers the following areas:

Who is affected by the amendments;
What are the changes under the amendments;
Compliance dates; and
Other resources.

For more information, click here.

Release No. 33-10911: Rule 144 Holding Period and Form 144 Filings

Summary - The SEC proposed an amendment to Rule 144 under the Securities Act of 1933 to revise the holding period determination for securities acquired upon the conversion or exchange of certain "market-adjustable securities." According to the SEC, the proposed amendment is intended to reduce the risk of unregistered distributions in connection with sales of those securities. The SEC also voted to propose amendments to update and simplify the Form 144 filing requirements.

Under current law, Rule 144 deems securities acquired solely in exchange for other securities of the same issuer to have been acquired at the same time as the securities surrendered for conversion or exchange. The amendments adopted provide that the holding period for the underlying securities acquired upon conversion or exchange of "market-adjustable securities" would not begin until conversion or exchange. This means that a purchaser would need to hold the underlying securities for the applicable Rule 144 holding period before reselling them under Rule 144.

The proposed amendments would mandate electronic filing of Form 144, eliminate the requirement to file a Form 144 with respect to sales of securities issued by companies that are not subject to Exchange Act reporting, and amend the Form 144 filing deadline to coincide with the Form 4 filing deadline.

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.

Release No. 34-90788: Custody of Digital Asset Securities by Special Purpose Broker-Dealers

Summary - The SEC issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers in order to encourage innovation around the application of Securities Exchange Act Rule 15c3-3 to digital asset securities.

The statement sets forth the SEC's position that, “for a period of five years, a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of Rule 15c3-3. These circumstances, among other things, include that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities.”

In addition, the SEC is requesting comment to provide the agency and its staff with an opportunity to gain additional insight into the evolving standards and best practices with respect to custody of digital asset securities. Such insights will serve to inform any potential future SEC action in this space.

The SEC statement and request for comment will become effective 60 days after publication in the Federal Register.

For more information, click here.

Release No: 33-10891: Modernization of Rules and Forms for Compensatory Securities Offerings and Sales

Summary - The SEC proposed amendments to Securities Act Rule 701, which provides an exemption from registration for the issuance of compensatory securities by non-reporting issuers, and Form S-8, the Securities Act registration statement for compensatory offerings by reporting issuers.

The proposed amendments to Rule 701 and Form S-8 are designed to modernize the framework for compensatory securities offerings in light of the significant evolution in compensatory offerings and composition of the workforce since the SEC last substantively amended these regulations, allowing employees and other workers to receive equity compensation from their company while maintaining important investor protections.

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

For more information, click here.

Tax Updates

New Things Taxpayers Should Consider As They Get Ready To

File Taxes in 2021

Courtesy of IRS, www.irs.gov

Summary - When people get ready to file their federal tax return there are new things to consider when it comes to which credits to claim and what deductions to take. These things can affect the size of any refund the taxpayer may receive.

Here are some new key things people should consider when filing their 2020 tax return.

Recovery rebate credit

Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them:

They didn't receive an Economic Impact Payment in 2020.
They are single and their payment was less than $1,200.
They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400.
They didn't receive $500 for each qualifying child.

Refund interest payment

People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10.

New charitable deduction allowance

New this year, taxpayers who don't itemize deductions can take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, people should review Publication 526, Charitable Contributions.

Other refund-related reminders

Taxpayers shouldn’t rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some tax returns may require additional review and processing may take longer.
Refunds for taxpayers claiming the earned income tax credit or additional child tax credit can’t be issued before mid-February. This applies to the entire refund, not just the portion associated with this credit.
The fastest and most secure way to receive a refund is to combine direct deposit with electronic filing, including the IRS Free File program. Taxpayers can track the status of their refund using the Where’s My Refund? tool.

More information:

Publication 5348, Get Ready to File

Publication 5349, Year-Round Tax Planning is for Everyone

If you would like additional information regarding your tax return or planning, please feel free to contact our Senior Tax Manager, Nicole Zhao.

Extra Crunch

OTC Markets Group: Webinars

Summary - OTC Markets Group produces a series of informative webinars aimed at "helping companies navigate public market." Topics are varied and include conversations with key industry leaders and influencers in the areas of optimizing your company's visibility, advisor insights, policy & regulation and community banks.

To access these webinars and for more information about this resource, 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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