We are pleased to release MaloneBailey's May 2023 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

• How Gen Z Is Impacting the Workplace

Recent Accounting & Regulatory Updates



Recent FASB & AICPA Updates

• FASB Accounting Standards Updates - Accounting Standards Update No. 2023-01 — Leases (Topic 842) – Common Control Arrangements
• FASB Accounting Standards Updates - Accounting Standards Update No. 2023-02 — Investments—Equity Method and Joint Ventures (Topic 323) – Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
• Proposed Accounting Standards Update ASU: Income Taxes (Topic 740)-Improvements to Income Tax Disclosures
• Classification and Measurement –IASB Proposes Amendments to IFRS 9 Classification and Measurement Requirements 
• Comparative Financial Information –AICPA Issues TQA on Reporting on Comparative Financial Information  
• COSO –COSO Releases Guidance on Achieving Effective Internal Control Over Sustainability Reporting  

Recent SEC & PCAOB Updates

• Core Auditing Principles –PCAOB Proposes Modernization of Standards Addressing Core Auditing Principles and Responsibilities  
• Release No. 34-97143: Regulation Systems Compliance and Integrity
• Release No. 34-97141: Regulation S-P - Privacy of Consumer Financial Information and Safeguarding Customer Information
• Release No. 33-11167: Reopening of Comment Period for “Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies
• Release No. 34-97142: Cybersecurity Risk Management Rule for Broker-Dealers, Clearing Agencies, Major Security-Based Swap Participants, the Municipal Securities Rulemaking Board, National Securities Associations, National Securities Exchanges, Security-Based Swap Data Repositories, Security-Based Swap Dealers, and Transfer Agent

Extra Crunch

• Accounting Today's Library of Webinars and Whitepapers

About MaloneBailey, LLP

How Gen Z Is Impacting the Workplace

Summary - Our featured podcast highlights an important movement affecting organizations in all industries: how Gen Z is impacting the workplace. There are plenty of articles out there talking about Gen Z, the good and the bad, and how they are living their lives differently from generations before them.



Tune in to hear from the MaloneBailey team as they discuss questions like:

• Why is there so much buzz around the term 'Gen Z'?
• What does Gen Z value?
• What are some of the changes organizations are making to employ Gen Z?

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.

FASB Accounting Standards Updates - Accounting Standards Update No. 2023-01 — Leases (Topic 842) – Common Control Arrangements

Summary -The FASB has issued ASU No. 2023-01, Common Control Arrangements. This ASU provides 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 (that is, including public companies) to amortize leasehold improvements associated with common control leases over the useful life to the common control group.



The amendments in this ASU are generally 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.

For more information, click here.

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

FASB Accounting Standards Updates - Accounting Standards Update No. 2023-02 — Investments—Equity Method and Joint Ventures (Topic 323) – Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Summary -The FASB issued an Accounting Standards Update (ASU) ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, that is intended to improve the accounting and disclosures for investments in tax credit structures. The ASU is a consensus of the FASB’s Emerging Issues Task Force (EITF).

The ASU allows 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.

Reporting entities were previously permitted to apply the proportional amortization method only to qualifying tax equity investments in low-income housing tax credit (LIHTC) structures. In recent years, stakeholders asked the FASB to extend the application of the proportional amortization method to qualifying tax equity investments that generate tax credits through other programs, which resulted in the EITF addressing this issue.

For public business entities, the amendments are effective 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.

For more information, click here.

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

Proposed Accounting Standards Update ASU: Income Taxes (Topic 740)-Improvements to Income Tax Disclosures

Summary - The FASB has released for public comment the proposed Accounting Standards Update (ASU), Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The proposed ASU addresses requests for improved income tax disclosures from investors, lenders, creditors, and other allocators of capital (collectively, “investors”) that use the financial statements to make capital allocation decisions. The comment deadline is May 30, 2023.

Improving Understandability of the Tax Provision

During the FASB’s 2021 agenda consultation process and other stakeholder outreach, investors expressed concerns that existing income tax disclosures do not provide sufficient information to understand the tax provision for an entity that operates in multiple jurisdictions. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid in the statement of cash flows, to evaluate income tax risks and opportunities. While investors told FASB that they generally find these disclosures helpful, they suggested possible enhancements to better (a) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (b) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (c) identify potential opportunities to increase future cash flows.

The proposed amendments would address investor requests for more transparency about income tax information, including jurisdictional information, by requiring:

• Consistent categories and greater disaggregation of information in the rate reconciliation; and
• Income taxes paid disaggregated by jurisdiction.

Effective Dates

The FASB will determine the effective date and whether early adoption of the amendments is permitted after it considers stakeholder feedback on the proposed amendments. The proposed amendments would be applied retrospectively.

For more information, click here.

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

Classification and Measurement –IASB Proposes Amendments to IFRS 9 Classification and Measurement Requirements 

Summary - The IASB has released the Exposure Draft, Amendments to the Classification and Measurement of Financial Instruments—Proposed amendments to IFRS 9 and IFRS 7 (Exposure Draft). The comment deadline is July 19, 2023.

The proposed amendments respond to feedback received from a post-implementation review (PIR) of the classification and measurement requirements in IFRS 9, Financial Instruments, which concluded in December 2022. Feedback from that review indicated that most stakeholders believed those requirements achieved their intended purpose, while identifying specific areas for further enhancement or clarification. The Exposure Draft responds to these points.

IFRS 9 specifies how a company should classify and measure financial assets and financial liabilities. It became effective in January 2018, introducing a new credit impairment model in light of the global financial crisis, and combining classification and measurement requirements, impairment and hedge accounting to replace and improve on IAS 39, Financial Instruments: Recognition and Measurement.

In 2021, the IASB began a PIR of IFRS 9, beginning with an assessment of its classification and measurement requirements. In December 2022, the IASB published the Project Report and Feedback Statement IFRS Accounting Standards: IFRS 9 Financial Instruments—Classification and Measurement (PIR Report). The IASB plans reviews of further aspects of IFRS 9.

The proposed amendments include:

• Clarification of the classification of financial assets with environmental, social and corporate governance (ESG) and similar features; and
• Settlement of liabilities through electronic payment systems.
• In coordination with the release of the Exposure Draft, the IASB has published an Exposure Draft Snapshot, Amendments to the Classification and Measurement of Financial Instruments (Snapshot), which provides an overview of the proposals. 

For more information, click here.

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

Comparative Financial Information –AICPA Issues TQA on Reporting on Comparative Financial Information 

Summary - The AICPA has issued a new Technical Question and Answer (TQA) under Section 9150, Preparation, Compilation, and Review Engagements.

AICPA TQA Section 9150.35, “Reporting on Comparative Financial Information in a Document Containing Current-Year Financial Statements That Were Subjected to a Review or Compilation Engagement,” provides non-authoritative guidance on how an accountant should report when the entity presents comparative information in a document containing the current-year financial statements that were subjected to a review or compilation engagement.

The TQA explains at the outset that “’Comparative information’ is prior-period information presented for purposes of comparison with current-period amounts or disclosures” but “is not considered comparative financial statements because it is not a complete set of financial statements.” As such, the “accountant would consider any comparative information an entity presents to be supplementary information.”

As provided in AR-C section 80A, paragraph .34, and AR-C section 90A, paragraph .126, “when supplementary information accompanies financial statements and the accountant’s compilation or review report . . . the accountant should clearly indicate the degree of responsibility, if any, the accountant is taking with respect to such other information in either” (a) a report on supplementary information; or (b) “a separate paragraph in the accountant’s compilation report or an other-matter paragraph in the review report on the financial statements.”



TQA Section 9150.35 also provides three sample paragraphs practitioners may include in the accountant’s report or in the current year’s financial statements. 

For more information, click here.

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

COSO –COSO Releases Guidance on Achieving Effective Internal Control Over Sustainability Reporting 

Summary - The Committee of Sponsoring Organizations of the Treadway Commission (COSO) released the document, “Achieving Effective Internal Control over Sustainability Reporting (ICSR): Building Trust and Confidence through the COSO Internal Control-Integrated Framework” (ICSR Guidance). This release includes supplemental guidance for organizations to achieve effective internal control over sustainability reporting (ICSR), using the COSO Internal Control-Integrated Framework (COSO Framework). COSO believes its use will build trust and confidence in ESG/sustainability reporting, public disclosures, and enterprise decision-making.

COSO advises that the ICSR Guidance leverages knowledge gained in the application of COSO Framework to financial reporting over the past two decades. It introduces the concept of “internal control over sustainability reporting” (ICSR) into the internal control lexicon. The ICSR Guidance references and expands on a 2017 study by three of the co-authors, “Leveraging the COSO Internal Control—Integrated Framework to Improve Confidence in Sustainability Performance Data.”

The supplemental guidance points to several key themes as organizations and practitioners begin or continue establishing and maintaining an effective system of internal control over financial and sustainable business information. Although ICSR is not yet well established in practice, the ICSR Guidance discusses crucial insights that can be gained from the experiences of those organizations that are leading the way. In the new study, each of the 17 principles in the 2013 COSO Framework is explained and interpreted for application to sustainability. Additionally, “points of focus” from the COSO Framework are included along with practical insights and application of the supplemental guidance.

The principal authors of the ICSR Guidance are:

• Robert Herz, former FASB chair, founding member of the IASB and former SASB Foundation board member;
• Robert Hirth, Senior Managing Director at Protiviti, former COSO Chair and former vice-chair of the SASB;
• Douglas Hileman, consultant, ESG specialist, and member of [former] ESG Leadership Knowledge Group;
• Shari H. Littan, IMA Director, Corporate Reporting Research and Thought Leadership;
• Brad Monterio, IIA EVP of Member Competency and Learning and member of the IFRS Foundation’s IRCC; and
• Jeffrey C. Thomson, President and CEO of IMA and former COSO board member/lead director.



For more information, click here.

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

Core Auditing Principles –PCAOB Proposes Modernization of Standards Addressing Core Auditing Principles and Responsibilities 

Summary - The PCAOB issued for public comment a proposed new standard, AS 1000, General Responsibilities of the Auditor in Conducting an Audit. If adopted, AS 1000 would reorganize and consolidate a group of standards that were adopted on an interim basis by the PCAOB in April 2003 and that address the core principles and responsibilities of the auditor, such as reasonable assurance, professional judgment, due professional care, and professional skepticism.

The proposal would also amend certain other standards that address responsibilities fundamental to the conduct of an audit. Among other changes, the amendments would: (1) reinforce and clarify the engagement partner’s responsibility to exercise due professional care related to supervision and review; and (2) accelerate the documentation completion date by reducing the maximum period for the auditor to assemble a complete and final set of audit documentation from 45 days to 14 days.

The proposal intends to bring improvements designed to reflect changes in the auditing environment, eliminate outdated and inconsistent language, and increase consistency throughout PCAOB standards.

Public comments on the proposal are requested by May 30, 2023.

For more information, click here.

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

Release No. 34-97143: Regulation Systems Compliance and Integrity

Summary - The SEC is proposing amendments to Regulation Systems Compliance and Integrity (Regulation SCI) under the Securities Exchange Act of 1934 (Exchange Act). The proposed amendments would expand the definition of “SCI entity” to include a broader range of key market participants in the U.S. securities market infrastructure, and update certain provisions of Regulation SCI to take account of developments in the technology landscape of the markets since the adoption of Regulation SCI in 2014.

Comments on the proposal are due 60 days after publication in the Federal Register.

For more information, click here.

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

Release No. 34-97141: Regulation S-P - Privacy of Consumer Financial Information and Safeguarding Customer Information

Summary - The SEC is proposing rule amendments that would require brokers and dealers (or “broker-dealers”), investment companies, and investment advisers registered with the SEC (“registered investment advisers”) to adopt written policies and procedures for incident response programs to address unauthorized access to or use of customer information, including procedures for providing timely notification to individuals affected by an incident involving sensitive customer information with details about the incident and information designed to help affected individuals respond appropriately.

The SEC also is proposing to broaden the scope of information covered by amending requirements for safeguarding customer records and information, and for properly disposing of consumer report information. In addition, the proposed amendments would extend the application of the safeguards provisions to transfer agents. The proposed amendments would also include requirements to maintain written records documenting compliance with the proposed amended rules. Finally, the proposed amendments would conform annual privacy notice delivery provisions to the terms of an exception provided by a statutory amendment to the Gramm-Leach-Bliley Act.

Comments on the proposal are due 60 days after publication in the Federal Register.



For more information, click here.

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

Release No. 33-11167: Reopening of Comment Period for “Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies"

Summary - The SEC has reopened the comment period on proposed rules and amendments related to cybersecurity risk management and cybersecurity-related disclosure for registered investment advisers, registered investment companies, and business development companies that were proposed by the SEC on February 9, 2022.

The SEC indicates that the “reopened comment period will allow interested persons additional time to analyze the issues and prepare comments in light of other regulatory developments, including whether there would be any effects of other Commission proposals related to cybersecurity risk management and disclosure that the Commission should consider.”

The comment period will remain open until 60 days after the date of publication of the reopening release in the Federal Register



For more information, click here.

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

Release No. 34-97142: Cybersecurity Risk Management Rule for Broker-Dealers, Clearing Agencies, Major Security-Based Swap Participants, the Municipal Securities Rulemaking Board, National Securities Associations, National Securities Exchanges, Security-Based Swap Data Repositories, Security-Based Swap Dealers, and Transfer Agents

Summary - The SEC has proposed for public comment proposed requirements for broker-dealers, clearing agencies, major security-based swap participants, the Municipal Securities Rulemaking Board, national securities associations, national securities exchanges, security-based swap data repositories, security-based swap dealers, and transfer agents (collectively, “Market Entities”) to address their cybersecurity risks.

The proposal would require all Market Entities to implement policies and procedures that are reasonably designed to address their cybersecurity risks and, at least annually, review and assess the design and effectiveness of their cybersecurity policies and procedures, including whether they reflect changes in cybersecurity risk over the time period covered by the review. The proposal, through new notification requirements applicable to all Market Entities and additional reporting requirements applicable to Market Entities other than certain types of small broker-dealers (collectively, “Covered Entities”), would improve the SEC’s ability to obtain information about significant cybersecurity incidents affecting these entities. Further, new public disclosure requirements for Covered Entities would improve transparency about the cybersecurity risks that can cause adverse impacts to the U.S. securities markets.



The public comment period will remain open until 60 days after the date of publication of the proposing release in the Federal Register.



For more information, click here.

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

Accounting Today's Library of Webinars and Whitepapers

Summary - Accounting Today, a leading accounting trade publication, provides a plethora of whitepapers and webinars that offer insight on the industry and cover topics related to practice management, technical guidance, case studies, and much more.

To review the complete library of resources, please click here.