We are pleased to release MaloneBailey's March 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

What's the Crunch?  Featured Podcast SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions & Dispositions of Businesses Recent FASB & AICPA Updates Going Concern – IFRS Foundation Publishes Educational Material on Going Concern  Segment Reporting – FASB Discusses Segment Reporting AICPA Auditing Standards Board – Summary of January 11-14, 2021 Meeting Published   GAO Professional Standards – GAO Issues Professional Standards Update No. 79  Liabilities and Equity – FASB Discusses Distinguishing Liabilities from Equity  Recent SEC & PCAOB Updates Release No. 34-90610: Market Data Infrastructure   Release No. IC-34188: Request for Comment on Potential Money Market Fund Reform Measures in President’s Working Group Report  Auditor Independence – SEC Approves Amendments Aligning Independence Requirements with SEC Rules  Audit Committees – PCAOB Releases Perspectives from 2020 Conversations with Audit Committee Chairs  Securities Offerings – SEC Staff Issues Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility  Money Market Fund Reform – SEC Requests Comments on Potential Money Market Fund Reform  Tax Updates IRS.GOV: 'Victims of Texas Winter Storms Get Deadline Extensions and Other Tax Relief' Extra Crunch DTCC Perspectives: 'From Where We Stand' About MaloneBailey, LLP

Featured Podcast

SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions and Dispositions of Businesses Summary - In this episode of “Everybody Counts” , Caroline Rosen, Marketing and Communications Manager and Leah Gonzales, Audit Partner, discuss the Securities and Exchange Commission’s (SEC) recent vote to adopt amendments to its rules and forms. This amendment will improve for investors the financial information about acquired or disposed businesses, facilitate more timely access to capital, and reduce the complexity and costs to prepare the disclosure. Click on the image below to listen to the podcast. For this podcast and many more, please visit the Resources section of the MaloneBailey website.

Recent FASB & AICPA Updates

Going Concern – IFRS Foundation Publishes Educational Material on Going Concern Summary - The IFRS Foundation has issued educational materials to support companies in consistent application of going concern requirements under International Financial Reporting Standards (IFRS). The educational material, Going Concern—A Focus on Disclosure, neither changes nor adds to the existing IFRS requirements. IFRS requires companies preparing financial statements under IFRS to assess their ability to continue as a going concern. In the current stressed economic environment arising from the COVID-19 pandemic, deciding whether the financial statements should be prepared on a going concern basis may involve a greater degree of judgment than usual. To support companies, the educational material brings together the requirements in IFRS relevant for going concern assessments. As discussed in the educational material, under International Accounting Standard (IAS) 1, Presentation of Financial Statements, companies must disclose material uncertainties relating to the entity’s ability to continue as a going concern. IAS 1 defines going concern by explaining that financial statements are prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so. Factors that management may need to consider when assessing whether the going concern basis of preparation is appropriate are those factors that relate to the entity’s current and expected profitability, the timing of repayment of existing financing facilities, and potential sources of replacement financing. As IAS 1 requires management to take into account all available information about the future, given the current stressed environment, entities may be affected by a wider range of factors than previously. Thus management needs to consider those additional factors. These include the effects of temporary shut-downs or curtailment of activities, potentially imposed by governments, the availability of government support, and the effects of longer-term structural changes in the market place, including changes in customer behavior.  The educational material provides guidance on how to assess the applicable factors for an entity’s particular situation. It includes a flowchart that considers four potential scenarios ranging from an entity with no significant doubts about going concern to an intention to liquidate. The flowchart uses the scenarios to provide guidance on assessing the effect of a deteriorating situation on the entity. The discussion includes how management can do a dynamic assessment of the applicable environment and effect on the entity, focus on disclosures relating to going concern, and evaluate assumptions management uses in reaching conclusions on the entity’s ability to continue as a going concern.  For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Segment Reporting – FASB Discusses Segment Reporting Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on January 20, 2021. The FASB continued its deliberations of a principle-based disclosure requirement to report the significant segment expenses that are both: (1) regularly provided to the chief operating decision maker (CODM); and (2) included in the reported measure of segment profit or loss. The FASB reached a number of decisions, including:  Applying the principle would involve the following steps: (1) An entity should identify segment expenses from the information that is regularly provided to the CODM; (2) The entity would then apply the significance threshold to determine which of those expenses should be disclosed. The FASB discussed stakeholder feedback that the effect of the significance threshold within the principle may be perceived in different ways. The FASB decided to retain the significance threshold and make no further changes. The FASB decided to include clarifying guidance that if a CODM is regularly provided with multiple sets of segment expenses that are measured under different accounting bases, the expenses to be reported under the principle should be those that are included in the reported measure of segment profit or loss. The FASB considered stakeholder feedback that segment expenses are regularly provided to a CODM under various fact patterns, including when an amount for total segment expenses is provided or when segment expenses on a variance basis are provided.  For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

AICPA Auditing Standards Board – Summary of January 11-14, 2021 Meeting Published Summary - The ASB has published a high-level summary of its January 11-14, 2021 meeting. The ASB voted to expose proposed revisions to AU-C Section 210, Terms of Engagement, which would “require a prospective successor auditor, once management authorizes the predecessor auditor to respond to inquiries from the auditor, to inquire of the predecessor auditor regarding identified or suspected fraud or noncompliance with laws or regulation (NOCLAR).” The Professional Ethics Executive Committee (PEEC) is also considering proposed revisions to the AICPA Code of Professional Conduct regarding NOCLAR, and the ASB plans to issue its exposure draft in conjunction with an anticipated exposure draft from PEEC by the end of February, with a comment period of at least 90 days. The ASB also voted to expose proposed standards intended to convergence with the International Auditing and Assurance Standards Board’s (IAASB) recently finalized quality management standards. The exposure draft, Proposed Quality Management Standards, includes three interrelated proposed standards: Proposed Statement on Quality Management Standards (SQMS) A Firm’s System Proposed SQMS Engagement Quality Reviews; and Proposed Statement on Auditing Standards (SAS) Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards. The proposed standards bring important changes to the way firms are expected to manage quality for its accounting and auditing practice. The proposed standards include a new proactive risk-based approach to effective quality management systems within firms, which improves the scalability of the standards because it promotes a system tailored to the nature and circumstances of the firm and its engagements.  For more information, click here. © 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

GAO Professional Standards – GAO Issues Professional Standards Update No. 79 Summary - The Government Accountability Office (GAO) has published Professional Standards Update (PSU) No. 79, covering standards published from July through December 2020. PSUs provide brief summaries of recently issued standards of major auditing and accounting standard setting bodies, including, among others, the GAO, the FASB, GASB, AICPA, and PCAOB. These updates alert users to changes in professional standards. Auditors may use the GAO’s Generally Accepted Governmental Auditing Standards (Yellow Book) in connection with professional standards issued by the GAO and other authoritative bodies. PSUs inform Yellow Book users of important changes to professional requirements and highlight some key points of recent standards. They do not establish new professional standards, reflect GAO official views on these requirements, nor provide a complete summary of the standards. The content in PSU 79 is divided into three sections: Section I, which identifies selected standards and guidance relevant for audits of financial statements for periods that ended in June 2020 through December 2020 that are coming into effect for the first time; Section II, which identifies selected standards and guidance that have been deferred but would have been relevant for financial audits with periods ending June 2020 through December 2020; and Section III, which identifies selected standards and guidance that were issued from July 2020 through December 2020 to the extent that such materials were publicly available as of December 31, 2020. Users should refer to the original, authoritative standards for details on those standards and for purposes of implementing them.  For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Liabilities and Equity – FASB Discusses Distinguishing Liabilities from Equity Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on February 3, 2021 and continued initial deliberations by discussing the project direction to help focus the FASB staff’s research and outreach efforts. The FASB decided that the project scope should include the following instruments and features: Freestanding financial instruments that have all the characteristics of a derivative instrument; Freestanding instruments that potentially are settled in an entity’s own stock, regardless of whether the instrument has all the characteristics of a derivative instrument; and Embedded features that have the characteristics of a derivative instrument. For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Recent SEC & PCAOB Updates

Release No. 34-90610: Market Data Infrastructure Summary - The SEC adopted rules to modernize the infrastructure for the collection, consolidation, and dissemination of market data for exchange-listed national market system stocks (NMS market data). The SEC indicates that this “infrastructure has not been significantly updated since its initial implementation in the late 1970s. The adopted rules update and significantly expand the content of NMS market data to better meet the diverse needs of investors in today’s equity markets. The adopted rules also update the method by which NMS market data is consolidated and disseminated, by fostering a competitive environment and providing for a new decentralized model that promises reduced latency and other new efficiencies. The content of NMS market data and the model for collecting, consolidating, and disseminating NMS market data have not kept pace with the needs of market participants. The rules adopted seek to address this concern in two fundamental ways: The rules update and expand the content of NMS market data; and The rules establish a decentralized consolidation model in which competing consolidators, rather than the exclusive SIPs, will be responsible for collecting, consolidating, and disseminating consolidated market data to the public. The adopted rules will be effective 60 days after publication in the Federal Register but in order to facilitate an orderly transition, the SEC has developed a phased transition plan that will begin in 2021. For more information, click here.  © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Release No. IC-34188: Request for Comment on Potential Money Market Fund Reform Measures in President’s Working Group Report Summary - The SEC has published a Request for Comment on Potential Money Market Fund Reform Measures in President’s Working Group Report. This document seeks comment on potential reform measures for money market funds, as highlighted in a recent report of the President’s Working Group on Financial Markets. Public comments on the potential policy measures will help inform consideration of reforms to improve the resilience of money market funds and broader short-term funding markets. Comments are requested 60 days from publication in the Federal Register. For more information, click here.  © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Auditor Independence – SEC Approves Amendments Aligning Independence Requirements with SEC Rules Summary - The SEC has approved amendments to PCAOB interim independence standards and PCAOB rules to align with amendments to Rule 2-01 of SEC Regulation S-X.  In November 2020, the PCAOB adopted amendments to its independence standards that align with the 2019 SEC revisions to its auditor independence rules. These amendments revised the SEC’s auditor independence requirements in Rule 2-01 of Regulation S-X, Qualifications of Accountants, regarding 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. In October 2020, the SEC adopted additional amendments to Rule 2-01. In addition to other provisions, the October revisions to Rule 2-01 added certain student loans and de minimis consumer loans to the categorical exclusions from independence-impairing lending relationships under Rule 2-01. In certain circumstances, such loans are not currently allowed under PCAOB’s interim independence standards. The PCAOB amended its interim independence standards to avoid inconsistent requirements on lending arrangements, which should help clarify an auditor’s independence obligations and facilitate compliance with Rule 2-01. The PCAOB also conformed its definitions of terms, including “affiliate of the audit client,” “audit and professional engagement period,” and “investment company complex,” in PCAOB Rule 3501, Definitions of Terms Employed in Section 3, Part 5 of the Rules, to align with the SEC’s changes in Rule 2-01 to address confusion if the terms used in both the PCAOB’s and the SEC’s independence rules were defined differently. The amendments will be effective June 9, 2021, 180 days after the date of the publication of the SEC’s October 16, 2020 amendments to Rule 2-01 in the Federal Register. The June 9, 2021 effective date is aligned with the effective date of the SEC’s amendments to Rule 2-01. The amendments may be applied before the effective date at any point after SEC approval of the PCAOB’s amendments, provided that the final amendments are applied in their entirety.  For more information, click here.  © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Audit Committees – PCAOB Releases Perspectives from 2020 Conversations with Audit Committee Chairs Summary - The PCAOB released the publication, 2020 Conversations with Audit Committee Chairs. In 2020, the PCAOB reached out to audit committee chairs of most of the U.S. public companies whose audits the PCAOB inspected and offered them the opportunity to share their experiences with auditors. In total, the PCAOB spoke to nearly 300 audit committee chairs. This outreach was part of the PCAOB’s strategic goal of enhancing transparency and accessibility through proactive stakeholder engagement. The publication summarizes the feedback received in each of three core topics: The auditor and communications with the audit committee; New auditing and accounting standards; and Emerging technologies. The publication notes that the PCAOB does not necessarily endorse the comments of the audit committee chairs. Instead, the PCAOB is providing this summary in an effort to provide greater transparency into these conversations.  For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Securities Offerings – SEC Staff Issues Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published a Sample Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility. This sample illustrative letter contains sample comments that, depending on the particular facts and circumstances, Corp Fin may issue to companies seeking to raise capital in securities offerings amid market and price volatility. For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Money Market Fund Reform – SEC Requests Comments on Potential Money Market Fund Reform Summary - The SEC has published a Request for Comment on Potential Money Market Fund Reform Measures in President’s Working Group Report. This document seeks comment on potential reform measures for money market funds, as highlighted in a recent report of the President’s Working Group on Financial Markets. Public comments on the potential policy measures will help inform consideration of reforms to improve the resilience of money market funds and broader short-term funding markets. Comments are requested 60 days from publication in the Federal Register.  For more information, click here. © 2021 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Tax Updates

Victims of Texas Winter Storms Get Deadline Extensions and Other Tax Relief Courtesy of the Internal Revenue Service Click here for the article on IRS.gov   Summary -  Victims of this month's winter storms in Texas will have until June 15, 2021, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today. Following the recent disaster declaration issued by the Federal Emergency Management Agency (FEMA), the IRS is providing this relief to the entire state of Texas. But taxpayers in other states impacted by these winter storms that receive similar FEMA disaster declarations will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The tax relief postpones various tax filing and payment deadlines that occurred starting on February 11. As a result, affected individuals and businesses will have until June 15, 2021, to file returns and pay any taxes that were originally due during this period. This includes 2020 individual and business returns normally due on April 15, as well as various 2020 business returns due on March 15. Among other things, this also means that affected taxpayers will have until June 15 to make 2020 IRA contributions. The June 15 deadline also applies to quarterly estimated income tax payments due on April 15 and the quarterly payroll and excise tax returns normally due on April 30. It also applies to tax-exempt organizations, operating on a calendar-year basis, that have a 2020 return due on May 17. In addition, penalties on payroll and excise tax deposits due on or after February 11 and before February 26 will be abated as long as the deposits are made by February 26. The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time. The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated. In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or the return for the prior year. This means that taxpayers can, if they choose, claim these losses on the 2020 return they are filling out this tax season. Be sure to write the FEMA declaration number – 4586 − on any return claiming a loss. See Publication 547 for details. The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.   If you would like additional information, please feel free to contact our Senior Tax Manager, Nicole Zhao.

Extra Crunch

DTCC Perspectives: From Where We Stand Summary - According to the DTCC website, it is "the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers." From Where We Stand is DTCC's thought leadership hub that offers perspectives and insights "on the innovations that are driving the transformation of global markets as well as the fintech revolution, the critical role of market infrastructures, opportunities to overcome the challenges of the complex regulatory environment and more. For more information, please click here.

About MaloneBailey, LLP

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