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Accounting and Auditing Supplement No. 1–2020

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Chapter 1

Accounting and Auditing Supplement No. 1–2020

Introduction

This update includes the more significant accounting and auditing developments from January 1, 2020,

through March 31, 2020. Included in this update are standard-setting and project activities of the Auditing

Standards Board (ASB), Accounting and Review Services Committee (ARSC), Professional Ethics

Executive Committee (PEEC), FASB, the PCAOB, and the SEC.

These developments, although believed to be complete at the date at which they were prepared for this

course material, may not cover all areas within accounting and auditing relevant to all users of this

material.

This update may refer you to other sources of information, in which case, you are strongly encouraged to

review that information if relevant to your needs.


Audit and accounting final and proposed standards

Final standards, interpretations, and regulations

AICPA

Auditing Standards Board

Statement on Auditing Standards

Statement on Auditing Standards No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134

Issue date

March 2020

Main provisions and significant changes

The ASB issued SAS No. 139 to incorporate auditor reporting changes from SAS No. 134. That is, SAS

No. 139 updates the form and content of auditors’ reports addressed in the AU-C section 800 series to be

more consistent with the standards of the International Auditing and Assurance Standards Board and

recent updates to PCAOB standards.1 The amendments also reflect the recent issuance of SAS No. 136,

Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA

and SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.

The following table describes the changes.

AU-C section Title Change

800 Special Considerations — Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks

Requires that a statement be added to the auditor’s report indicating that the financial statements may not be suitable for another purpose when a description of the purpose for which the financial statements are prepared or a reference to a note in the special purpose financial statements that contains that information is required. (This description is required when financial statements are prepared on a regulatory or contractual basis of accounting or an other basis of accounting, and the auditor is required to restrict use of the auditor’s report by paragraph .06a–b of section 905, Alert That Restricts the Use of the Auditor’s Written Communication.)

2

1 See https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/sas-

139-at-a-glance.pdf; accessed April, 23, 2020. 2 See footnote 1.

https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/sas-139-at-a-glance.pdf

https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/sas-139-at-a-glance.pdf


805 Special Considerations — Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement

Addresses factors to consider in determining whether a matter included in the auditor’s report on the complete set of financial statements is relevant in the context of an engagement to report on a single financial statement or a specific element of a financial statement.

3

810 Engagements to Report on Summary Financial Statements

Adds application paragraphs to AU-C section 810 indicating that although the auditor is required to include a statement in the auditor’s report on the summary financial statements when the auditor’s report on the audited financial statements includes communication of one or more key audit matters, the auditor is not required to describe the individual key audit matters or repeat the corresponding text in its entirety in the auditor’s report on the summary financial statements

Effective date

SAS No. 139 is effective for periods ending on or after December 15, 2020. Early implementation is not

permitted.

Accounting and Review Services Committee

Statement on Standards for Accounting and Review Services

Statement on Standards for Accounting and Review Services No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions

Issue date

February 2020

Statement on Standards for Accounting and Review Services (SSARS) No. 25 amends the following AR-C

sections:

60, General Principles for Engagements Performed in Accordance With Statements on Standards for Accounting and Review Services

70, Preparation of Financial Statements 80, Compilation Engagements 90, Review of Financial Statements

SSARS No. 25 further converges AR-C section 90 with International Standard on Review Engagements

(ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements and minimizes differences

with the auditing standards regarding concepts that are consistent regardless of the level of service

performed on the financial statements.

3 See https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-C-00800.pdf;

accessed April 23, 2020.

https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-C-00800.pdf


Key provisions include the following:

Explicit requirement to determine materiality Allow for the expression of an adverse review conclusion when financial statements are materially

and pervasively misstated Required statement regarding independence in the accountant’s review report

Effective date

SSARS No. 25 is effective for engagements performed in accordance with SSARSs for periods ending on

or after December 15, 2021. Early implementation is permitted.

Technical Questions and Answers (Q&A) (Nonauthoritative)

Q&A Section 2210, Fixed Assets

Issue date

This Q&A was revised in March 2020 to reflect conforming changes necessary due to the issuance of

recent authoritative literature.

.28 Accounting for Certain Liquidated Damages

Inquiry — “Liquidated damages” represent contractual payments to a buyer of property, plant, and

equipment (PP&E) for the nondelivery or noncompletion of construction of PP&E by a stated completion

date. The amount is specified in advance by contract — for example, a stated amount per day of delay —

rather than a computation of actual losses of the buyer caused by the delay. Liquidated damages are

negotiated to represent compensation for a reasonable estimate of the buyer’s costs associated with a

delay. Liquidated damages are specified in advance in order to eliminate the need for possibly

contentious after-the-fact negotiations about actual costs incurred. How should a buyer of PP&E account

for liquidated damages, as defined above?

Reply — Because the buyer does not provide the payer of the damages with an identifiable benefit in

exchange for the payment, a buyer typically records liquidated damages as a reduction of the payments

it has made to the vendor for the PP&E (that is, a reduction of the cost of the PP&E). Amounts of

liquidated damages in excess of the total cost of PP&E would be recognized by the buyer as income.

The basis for this reply is FASB ASC 705-20. As stated in FASB ASC 705-20-25-1:

The entity shall account for consideration from a vendor as a reduction of the purchase price of

the goods or services acquired from the vendor unless the consideration from the vendor is one

of the following:

a. In exchange for a distinct good or service (as described in paragraphs 606-10-25-19 through 25-22) that the entity transfers to the vendor

b. A reimbursement of costs incurred by the entity to sell the vendor’s products c. Consideration for sales incentives offered to customers by manufacturers.


Contracts between a buyer and provider of PP&E could be drafted in two ways — with a realistic

completion date and contract price with liquidated damages for late delivery, or with a pessimistic

completion date and a bargain contract price with a bonus for early delivery. The accounting for

liquidated damages, as noted in this reply, results in the same accounting for the buyer regardless of how

the contract is drafted.

Professional Ethics Executive Committee

PEEC did not issue any new or revised standards or interpretations during this period.

FASB

Accounting Standards Updates

Accounting Standards Update (ASU) No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)

Issue date

January 2020

Major provisions and significant changes

FASB ASU No. 2020-01 is applicable to entities that 1) elect to measure equity securities without readily

determinable fair values using the measurement alternative in FASB Accounting Standards Codification

(ASC) 321, Investments—Equity Securities or 2) enter into certain contracts on debt and equity securities,

as described in FASB ASC 815-10-15-141.

The amendments to FASB ASC 321 clarify that an equity security should be remeasured in accordance

with FASB ASC 321-10-35 when an observable transaction results in application or discontinuance of the

equity method of accounting.

The amendments to FASB ASC 815, Derivatives and Hedging, clarify that for forward contracts and

purchased options, an entity should not consider whether, upon settlement of the contract or exercise of

the option, the underlying securities would be accounted for under (a) the equity method in accordance

with FASB ASC 323, Investments—Equity Method and Joint Ventures, or (b) the fair value option in

accordance with FASB ASC 825, Financial Instruments, if those securities otherwise would have been

accounted for under FASB ASC 323.

Effective date

This ASU is effective for public business entities for fiscal years beginning after December 15, 2020, and

interim periods within those fiscal years. For all other entities, the ASU is effective for fiscal years

beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is

permitted. See the ASU for transition requirements.


ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update)

Issue date

February 2020


Alignment of SEC Interpretative Guidance With FASB ASC

ASU No. 2020-02 adds an SEC paragraph pursuant to SEC Staff Accounting Bulletin No. 119, which

updates portions of the interpretive guidance included in the staff accounting bulletin series to align the

staff’s guidance with FASB ASC 326, Financial Instruments—Credit Losses (FASB ASC 326-20-S99-1). The

guidance addresses the following:

Measuring current expected credit losses Development, governance, and documentation of a systematic methodology Documenting the results of a systematic methodology

Effective date of FASB ASC 842

This ASU amends FASB ASC 842-10-S65-1 to reflect the deferral of the effective date, based on ASU No.

2019-10, and also adds SEC staff comments:

842-10-S65-1 Note: At the December 2019 AICPA National Conference on Current SEC and PCAOB

Developments, the SEC staff announced that it would not object to a public business entity that

otherwise would not meet the definition of a public business entity except for a requirement to

include or the inclusion of its financial statements or financial information in another entity’s filing

with the SEC adopting Topic 842, Leases, for fiscal years beginning after December 15, 2020, and

interim periods within fiscal years beginning after December 15, 2021. Those dates are consistent

with the effective dates for Topic 842 as amended in Accounting Standards Update No. 2019-10,

Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases

(Topic 842): Effective Dates.

ASU No. 2020-03, Codification Improvements to Financial Instruments

Issue date

March 2020


The amendments in ASU No. 2020-03 update various FASB ASC topics and apply to entities within the

scope of those topics. FASB organized the updates into seven issues, which are summarized in the

following table.


Issue Area of Improvement Summary of Amendments

1* Fair Value Option Disclosures The amendments clarify that all entities are required to provide the

fair value option disclosures in paragraphs 825-10-50-24 through 50-32.

2* Applicability of the portfolio

exception in FASB ASC 820, Fair Value Measurement to nonfinancial items

FASB ASC 820-10-35-2A(g) and 820-10-35-18L are amended to include the phrase nonfinancial items accounted for as derivatives under FASB ASC 815, Derivatives and Hedging, to be consistent with the previous amendments to FASB ASC 820-10-35 that were made by ASU No. 2018-09, Codification Improvements.

3† Disclosures for Depository and

Lending Institutions The amendments clarify that the disclosure requirements in FASB ASC 320, Investments—Debt and Equity Securities, apply to the disclosure requirements in FASB ASC 942, Financial Services—Depository and Lending, for depository and lending institutions.

4* Cross-reference to line-of-credit or

revolving-debt arrangements guidance in FASB ASC 470-50, Debt—Modifications and Extinguishments

The amendments improve the understandability of the guidance.

5* Cross-reference to net asset value

practical expedient in FASB ASC 820-10

The amendments improve the understandability of the guidance.

6‡ Interaction of FASB ASC 842,

Leases, and FASB ASC 326, Financial Instruments—Credit Losses

The amendments clarify that the contractual term of a net investment in a lease determined in accordance with FASB ASC 842 should be the contractual term used to measure expected credit losses under FASB ASC 326.

7‡ Interaction of FASB ASC 326 and

FASB ASC 860-20, Transfers and Servicing—Sales of Financial Assets

The amendments to FASB ASC 860-20 clarify that when an entity regains control of financial assets sold, an allowance for credit losses should be recorded in accordance with FASB ASC 326.

* The effective dates are as follows: Public business entities. Effective upon issuance of the ASU. All other entities. Effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted.

† The effective date is consistent with ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.

‡ The effective date is consistent with ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Issue date

March 2020



ASU No. 2020-04 is applicable to all entities who elect to apply the guidance and only to contracts or

other transactions that reference the London Interbank Offered Rate (LIBOR) or a reference rate that is

expected to be discontinued as a result of reference rate reform. The ASU provides optional elections and

expedients as an alternative to assessing whether the modifications of contracts within the scope of the

guidance result in the establishment of new contracts or the continuation of existing contracts.

ASU No. 2020-04 adds a new topic, FASB ASC 848, Reference Rate Reform, to the FASB ASC. The new

FASB ASC topic includes the following subtopics:

10, Overall 20, Contract Modifications 30, Hedging—General 40, Fair Value Hedges 50, Cash Flow Hedges

Effective date

The ASU is effective for all entities as of March 12, 2020, through December 31, 2022. See the ASU or the

applicable subtopic for transition requirements. Readers are encouraged to view the ASU in its entirety at

fasb.org.

SEC

SEC Final Rules

Following are summaries of final rules issued by the SEC in the first quarter of 2020. The final rules can

be found on the final rules page of SEC.gov under the “Regulation” topic of the website’s ribbon.

Release No. 34-88365, Amendments to the Accelerated and Large Accelerated Filer Definitions

Issue date

March 12, 2020


In this release, the SEC adopts amendments to the accelerated filer and large accelerated filer definitions

to more appropriately tailor the types of issuers that are included in the categories of accelerated and

large accelerated filers and promote capital formation, preserve capital, and reduce unnecessary burdens

for certain smaller issuers while maintaining investor protections.

According to the SEC:

The amendments exclude from the accelerated and large accelerated filer definitions an issuer

that is eligible to be a smaller reporting company and that had annual revenues of less than $100

million in the most recent fiscal year for which audited financial statements are available.

The amendments also include a specific provision excluding business development companies

from the accelerated and large accelerated filer definitions in analogous circumstances. In


addition, the amendments increase the transition thresholds for accelerated and large

accelerated filers becoming nonaccelerated filers from $50 million to $60 million, and for exiting

large accelerated filer status, from $500 million to $560 million.

Further, the amendments add a revenue test to the transition thresholds for exiting from both

accelerated and large accelerated filer status.

Finally, the amendments add a check box to the cover pages of Forms 10-K, 20-F, and 40-F to

indicate whether an internal control over financial reporting (ICFR) auditor attestation is included

in the filing. As a result of the amendments, certain low-revenue issuers will remain obligated,

among other things, to establish and maintain ICFR and have management assess the

effectiveness of ICFR, but they will not be required to have their management’s assessment of

the effectiveness of ICFR attested to, and reported on, by an independent auditor.

The purpose of the amendments to the accelerated filer and large accelerated filer definitions in

Rule 12b-2 is to promote capital formation by more appropriately tailoring the types of issuers

that are included in the category of accelerated filers and revising the transition thresholds for

accelerated and large accelerated filers.

The amendments in this release are consistent with the SEC’s historical practice of providing

scaled disclosure and other accommodations for smaller issuers to reduce unnecessary burdens

on new and smaller issuers.4

Effective date

April 27, 2020

Release No. 33-10765, Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts

Date

March 11, 2020


In this release, the SEC adopts rule and form amendments intended to help investors make informed

investment decisions regarding variable annuity and variable life insurance contracts.

The amendments modernize disclosures by using a layered disclosure approach designed to

provide investors with key information relating to the contract’s terms, benefits, and risks in a

concise and more reader-friendly presentation, with access to more detailed information available

online and electronically or in paper format on request.

New rule 498A under the Securities Act of 1933 will permit a person to satisfy its prospectus

delivery obligations under the Securities Act for a variable annuity or variable life insurance

contract by sending or giving a summary prospectus to investors and making the statutory

4 See https://www.sec.gov/rules/final/2020/34-88365.pdf; accessed April 23, 2020.

https://www.sec.gov/rules/final/2020/34-88365.pdf


prospectus available online. The rule also will consider a person to have met its prospectus

delivery obligations for any portfolio companies associated with a variable annuity or variable life

insurance contract if the portfolio company prospectuses are posted online.

To implement the new disclosure framework, we are also amending the registration forms for

variable annuity and variable life insurance contracts to update and enhance the disclosures to

investors in these contracts, and to implement the proposed summary prospectus framework,

and adopting amendments to our rules that will require variable contracts to use the Inline

extensible Business Reporting Language (“Inline XBRL”) format for the submission of certain

required disclosures in the variable contract statutory prospectus. The SEC is also taking the

position that if an issuer of a discontinued contract that is discontinued as of July 1, 2020, that

provides alternative disclosures does not file post-effective amendments to update a variable

contract registration statement and does not provide updated prospectuses to existing investors,

this would not provide a basis for enforcement action so long as investors are provided with the

alternative disclosures or modernized alternative disclosures described below. We are also

adopting certain technical and conforming amendments to our rules and forms, including

amendments to rules relating to variable life insurance contracts, and rescinding certain related

rules and forms.5

Effective Date

July 1, 2020, except as defined in the rule.

Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities

Issue date

March 2, 2020


In this release, the SEC adopts amendments to the financial disclosure requirements for guarantors and

issuers of guaranteed securities registered or being registered, and issuers’ affiliates whose securities

collateralize securities registered or being registered in Regulation S-X to improve those requirements for

both investors and registrants. The changes are intended to provide investors with material information

given the specific facts and circumstances, make the disclosures easier to understand, and reduce the

costs and burdens to registrants. In addition, by reducing the costs and burdens of compliance, issuers

may be encouraged to offer guaranteed or collateralized securities on a registered basis, thereby

affording investors protection they may not be provided in offerings conducted on an unregistered basis.

Finally, by making it less burdensome and less costly for issuers to include guarantees or pledges of

affiliate securities as collateral when they structure debt offerings, the revisions may increase the number

of registered offerings that include these credit enhancements, which could result in a lower cost of

capital and an increased level of investor protection.6

5 See https://www.sec.gov/rules/final/2020/33-10765.pdf; accessed April 23, 2020.

6 See https://www.sec.gov/rules/proposed/2018/33-10526.pdf; accessed April 23, 2020.

https://www.sec.gov/rules/final/2020/33-10765.pdf

https://www.sec.gov/rules/proposed/2018/33-10526.pdf


Effective Date

January 4, 2021

Release No. IA-5454, Exemptions from Investment Adviser Registration for Advisers to Certain Rural Business Investment Companies

Issue date

March 2, 2020


In this release, the SEC amends the definition of the term venture capital fund and the private fund adviser

exemption under the Investment Advisers Act of 1940 to reflect in exemptions from registration

investment advisers who advise rural business investment companies (RBICs). Under the amendments,

the definition of the term venture capital fund includes RBICs.

The release also amends the definition of the term assets under management in the private fund adviser

exemption to exclude the assets of RBICs.

Effective Date

March 10, 2020

PCAOB

The PCAOB did not issue any new or revised standards or guidance in this period.

Proposed standards, interpretations, and regulations

AICPA

Auditing Standards Board

Statements on Auditing Standards

No proposed statements were issued in this period.

Statements on Standards for Attestation Engagements

No proposed statements were issued in this period.

Accounting and Review Services Committee

Statements on Standards for Accounting and Review Services

ARSC did not issue any proposed standards or interpretations in this period.


Professional Ethics Executive Committee

PEEC did not issue any proposals during this period.

FASB

Proposed Accounting Standards Updates

Proposed ASU, “Not-for-Profit Entities (Topic 958), Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets”

Issue date

February 2020

Comment deadline

April 10, 2020

Issued to increase the transparency of contributed nonfinancial assets for not-for-profit entities, this

exposure draft proposes enhancements to presentation and disclosure guidance in FASB ASC 958,

Not-for-Profit Entities.

The exposure draft seeks stakeholder feedback on six questions. On March 9, 2020, the Financial

Reporting Executive Committee (FinREC) of the AICPA provided comments on the exposure draft. The

following table identifies the six questions and summarizes FinREC’s comments.7

Question No. Exposure draft question FinREC’s summarized response

1 Are the amendments in this proposed Update operable? If not, which proposed amendment or amendments pose operability issues and why?

We believe that the standard is broadly written in a way that would permit flexibility in implementation, but that there are some areas where the intent of the standard is unclear, which would lead to continued diversity in practice rather than transparency.

2 Should the scope of the presentation and disclosure requirements apply to all contributed nonfinancial assets? If not, what types of nonfinancial contributions should be excluded from the scope and why? Should the scope of the presentation and disclosure requirements be extended to business entities? If yes, why?

We noted that certain disclosure requirements in these amendments were written to apply only to NFPs while others apply to all entities. We believe that consistent application of requirements for contributions received to be the better approach. Therefore, we recommend that this proposed standard, which addresses a specific type of contribution, apply to all entities to maintain alignment with the requirements in FASB ASU No. 2018-08 and

7 See https://www.aicpa.org/content/dam/aicpa/advocacy/financialreporting/downloadabledocuments/finrec-

comment-letters/20200309-finrec-cl-nfp.pdf; accessed April 23, 2020.

https://www.aicpa.org/content/dam/aicpa/advocacy/financialreporting/downloadabledocuments/finrec-comment-letters/20200309-finrec-cl-nfp.pdf

https://www.aicpa.org/content/dam/aicpa/advocacy/financialreporting/downloadabledocuments/finrec-comment-letters/20200309-finrec-cl-nfp.pdf


other existing provisions in the FASB ASC regarding contributions received.

3 Should the disclosure requirements in paragraph 958-605-50-1A(c) be required for each category of contributed nonfinancial assets? If not, please explain why.

The requirement to disclose the principal (or most advantageous) market used in determining fair value would be unique to contributions of nonfinancial assets to NFPs. While this might be relevant information to users of financial statements prepared for NFPs that have material amounts of pharmaceuticals and medical equipment, it would not be cost beneficial for the vast majority of nonfinancial asset contribution transactions. We recommend that this requirement be made optional for contributions of nonfinancial assets other than pharmaceuticals and medical equipment.

4 Would retrospective application of the proposed amendments be operable and would that application provide decision-useful information? If not, please explain why and what you would recommend.

We believe that retrospective application would be operable, given sufficient time for information gathering to allow comparative financial statement presentation.

5 How much time would be needed to adopt the proposed amendments? Should early adoption be permitted?

We believe that 2 years would be sufficient to allow NFPs to implement any changes needed to collect data and to allow preparation of comparative financial statements. We believe that early adoption should be permitted.

6 Is education or implementation guidance needed on the valuation of contributed nonfinancial assets? If yes, what type of guidance or additional education should be developed?

We believe that NFPs would benefit from FASB Staff Q&As that address the process of valuation and include examples of both simple and complex transactions to reduce overall diversity in practice.

SEC

SEC Proposed Rules

Following are summaries of proposed rules issued by SEC in the first quarter of 2020. The proposed

rules can be found on the SEC proposed rules page of SEC.gov under the “Regulation” topic of the

website’s ribbon.


Release No. 33-10763, Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets

Date issued

March 4, 2020

Comment deadline

June 1, 2020


In this release, the SEC is proposing amendments to facilitate capital formation and increase

opportunities for investors by expanding access to capital for entrepreneurs across the United States.

The proposed amendments seek to address gaps and complexities in the exempt offering framework

that may impede access to investment opportunities for investors and access to capital for issuers.8

Release No. 34-88216, Market Data Infrastructure

Date issued

February 14, 2020

Comment deadline

May 26, 2020


In this release, the SEC is proposing to amend 17 CFR 242, Rules 600 and 603 and to adopt new Rule 614

of Regulation National Market System (Regulation NMS) under the Securities Exchange Act of 1934

(Exchange Act) to update the national market system for the collection, consolidation, and dissemination

of information with respect to quotations for and transactions in national market system (NMS) stocks

(NMS information).

The SEC proposes to expand the content of NMS information that is required to be collected,

consolidated, and disseminated as part of the NMS under Regulation NMS by proposing several new

defined terms under Regulation NMS Rule 600, including the following:

Consolidated market data Core data, regulatory data Administrative data Exchange-specific program data

The SEC is proposing to amend the method by which “consolidated market data” for NMS stocks is

collected, calculated, and disseminated by introducing a decentralized consolidation model in which

competing consolidators replace the exclusive securities information processors.

The SEC is proposing to amend Rule 603 under Regulation NMS to remove the requirement that all

consolidated information for individual NMS stocks be disseminated through a single plan processor and

8 See https://www.sec.gov/rules/proposed/2020/33-10763.pdf; assessed April 23, 2020.



to require each national securities exchange and national securities association to make available its

NMS information in the same manner and using the same methods. This would include all methods of

access and the same format, as the exchange or association makes available any quotation or

transaction information for NMS stocks to any person.

The SEC is proposing to add new Rule 614 and a new Form CC to govern the registration and

responsibilities of competing consolidators.

The SEC is proposing that the effective national market system plans for NMS stocks be amended to

reflect the decentralized consolidation model; in addition, the SEC is proposing to amend Regulation SCI

to expand the definition of SCI entities to include competing consolidators.9

Release No. BHCA-8, Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds

Date issued

January 30, 2020

Comment deadline

April 1, 2020


Comments are requested on a proposal that would amend the regulations implementing section 13 of

the Bank Holding Company Act (BHC Act). The proposed amendments are intended to continue efforts

to improve and streamline the regulations implementing section 13 of the BHC Act by modifying and

clarifying requirements related to the covered fund provisions.10

Release No. 33-10750, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information

Date issued

January 30, 2020

Comment deadline

April 28, 2020

The SEC is proposing amendments to modernize, simplify, and enhance certain financial disclosure

requirements in Regulation S-K. Specifically, it proposed to eliminate Item 301 of Regulation S-K, Selected

Financial Data, and Item 302 of Regulation S-K, Supplementary Financial Information, because they are

largely duplicative of other requirements. It also proposed to amend Item 303 of Regulation S-K,

Management’s Discussion & Analysis of Financial Condition and Results of Operations (MD&A), to

modernize and enhance MD&A disclosures. In combination, the proposed amendments are intended to

9 See https://www.sec.gov/rules/proposed/2020/34-88216.pdf; assessed April 23, 2020.

10 See https://www.federalreserve.gov/aboutthefed/boardmeetings/files/volcker-rule-fr-notice-20200130.pdf;

accessed April 23, 2020.


https://www.federalreserve.gov/aboutthefed/boardmeetings/files/volcker-rule-fr-notice-20200130.pdf


eliminate duplicative disclosures and modernize and enhance MD&A disclosures for the benefit of

investors, while simplifying compliance efforts for registrants.11

PCAOB

PCAOB Release No. 2019-003, Potential Approach to Revisions to PCAOB Quality Control Standards

Date issued

December 2019

Comment deadline

Comments were requested by March 16, 2020.

This release seeks public comments on a potential approach to revise the PCAOB’s quality control

standards based on the proposed international standard on quality management, ISQM 1, with certain

differences as appropriate for firms that are subject to PCAOB standards and rules. The release can be

found at https://pcaobus.org/Rulemaking/Docket046/2019-003-Quality-Control-Concept-Release.pdf.

A link to comment letters can be found on the rulemaking docket page at

https://pcaobus.org/Rulemaking/Pages/docket-046-quality-control.aspx.

11

See https://www.sec.gov/rules/proposed/2020/33-10750.pdf; accessed April 23, 2020.

https://pcaobus.org/Rulemaking/Docket046/2019-003-Quality-Control-Concept-Release.pdf

https://pcaobus.org/Rulemaking/Pages/docket-046-quality-control.aspx


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