We are pleased to release MaloneBailey's July 2023 issue of The Crunch. This special edition of The Crunch highlights FASB updates that went into effect in 2023 as well as a review of the FASB updates will go into effect in 2024.

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. We invite you to visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.

The MaloneBailey Team

www.malonebailey.com 

What's the Crunch?



Featured Podcast

• Navigating Your First Audit Job

Recent Accounting & Regulatory Updates



FASB: What You Need to Know for 2024

• Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
• Leases (Topic 842): Common Control Arrangements 
• Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

FASB: A Review of 2023 Updates

• Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848
• Financial Services—Insurance (Topic 944): Transition for Sold Contracts
• Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
• Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
• Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method
• Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
• Financial Services-Insurance (Topic 944): Effective Date and Early Application

Extra Crunch

• IR Magazine: The Ticker Podcast

About MaloneBailey, LLP

Navigating Your First Audit Job

Summary - Navigating any new job can be daunting, especially if you’re new to the workforce. What do you need to know before your first day? How much work will I realistically be doing? What will my day to day look like? So many questions fill your mind when you take that new, big, and exciting first step into your career. Tune in to hear from Matt, Britainy and Nick, who joined MaloneBailey in the last year, discuss their experience, key learnings and useful advice for anyone embarking on their career!

Simply click on the image below to listen to the podcast. For this podcast and many more, please visit the Resources section of our website.

Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Summary - This ASU is effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period. 

'These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Leases (Topic 842): Common Control Arrangements 

Summary - This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. Transition can be done either retrospectively or prospectively.

These amendments provide private companies and not-for-profit organizations that are not conduit bond obligors with a practical expedient to use the written terms and conditions of a common control arrangement to determine whether a lease exists and, if so, the classification of and accounting for that lease.

In addition, the ASU requires all entities (i.e., including public companies) to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

Summary - ASU No. 2022-03 is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. For all other entities, it is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

'These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848

Summary - ASU No. 2022-06 is effective for all entities upon issuance. These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Services—Insurance (Topic 944): Transition for Sold Contracts

Summary - The effective dates of the amendments in ASU No. 2022-05 are consistent with the effective dates of the amendments in ASU No. 2020-11.

These amendments amend the LDTI transition guidance to allow an insurance entity to make an accounting policy election on a transaction-by-transaction basis to exclude contracts that meet certain criteria from applying the amendments in ASU No. 2018-12.

To qualify for the accounting policy election, as of the LDTI effective date both of the following conditions must be met:

1. The insurance contracts must have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities.
2. The entity has no significant continuing involvement with the derecognized contracts.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations

Summary - ASU NO. 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. An entity should apply ASU No. 2022-04 retrospectively to all periods in which a balance sheet is presented, except for the obligation rollforward, which should be applied prospectively.

'These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. 

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

Summary - ASU No. 2022-02 is effective for entities that have adopted ASU No. 2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted ASU No. 2016-13, the effective date is the same as the effective dates in ASU No. 2016-13.

These amendments should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

Early adoption is permitted if an entity has adopted ASU No. 2016-13, including adoption in an interim period. If an entity elects to early adopt ASU No. 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

These amendments eliminate the TDR recognition and measurement

guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

For public business entities, these amendments require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.

Gross writeoff information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by creditquality indicator and class of financing receivable by year of origination.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method

Summary - ASU No. 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, ASU No. 2022-01is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted on any date on or after the issuance of ASU No. 2022-01 for any entity that has adopted the amendments in ASU No. 2017-12 for the corresponding period. If an entity adopts the amendments in an interim period, the effect of adopting the amendments related to basis adjustments should be reflected as of the beginning of the fiscal year of adoption (i.e., the initial

application date). 

In 2017, the FASB issued a new hedging standard to better align the economic results of risk management activities with hedge accounting. 

One of the major provisions of that standard was the addition of the last-of-layer hedging method. For a closed portfolio of fixed-rate prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, such as mortgages or mortgage-backed securities, the last-of-layer method allows an entity to hedge its exposure to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows.

Since issuing that standard, stakeholders have told the FASB that the ability to elect hedge accounting for a single layer is useful, but hedge accounting could better reflect risk management activities if expanded to allow multiple layers of a single closed portfolio to be hedged under the method.

The ASU expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

Summary - The amendments are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. For all other entities they are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

Entities should apply the amendments prospectively to business combinations that occur after the effective date. Early adoption is permitted, including in any interim period, for Public business entities for periods for which financial statements have not yet been issued, and for all other entities for periods for which financial statements have not yet been made available for issuance.

'This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Services-Insurance (Topic 944): Effective Date and Early Application

Summary - The amendments permit the delay of the implementation of ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), by one year as follows:

For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, LDTI is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.

Early adoption is permitted. If early adoption is elected, the transition date is either the beginning of the prior period presented or the beginning of the earliest period presented. If early application is not elected, the transition date is the beginning of the earliest period presented.

This ASU allows the delayed adoption date of ASU No. 2018-12, as noted in the "Effective Date" information at the left. And allows insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.

For more information, click here.

© 2023 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

IR Magazine: The Ticker Podcast

Summary - IR Magazine offers a useful resource in The Ticker, a podcast that brings "the world of IR to your ears."

The Ticker brings together leading IR professionals, members of the magazine's team, analysts and investors to provide their perspectives, insights and analysis on a variety of topics.

To access The Ticker, please click here.