Weinberg & Company

Simply Stated Newsletter – October 2020

By November 19, 2020 No Comments


FASB’s Financial Accounting Standards Advisory Council (FASAC) is in no hurry to issue new guidance for a variety of accounting issues that were on its September 24th quarterly meeting agenda.

On the topic of “Government Assistance”, FASAC members “indicated that there is not an urgent need for the Board to develop specific guidance for government assistance and acknowledged the difficulty involved in developing new guidance in this area.” In addition, “Some users and other investors noted that they are currently receiving the information necessary to understand the impact government assistance may have on their analysis of a company”.

When discussing “Impairment of Nonfinancial Assets”, meeting minutes showed that the Council members “indicated that current GAAP is sufficient when determining whether an asset is impaired. Some Council members highlighted the increased potential for a company to have impairments of nonfinancial assets as a result of the current environment. As a result, some companies have incurred an increase in costs and complexity in applying GAAP, including the audit process, given the significant judgment involved in the impairment analysis.”

The FASAC also discussed whether improvements to the “Accounting for Research and Development” should be a priority for the FASB. It concluded that although “Council members were strongly aligned in the view that while the topic of R&D has received more focus given the current environment, the accounting for R&D is not a significant issue that should be given high priority for the Board’s agenda at this time.”

The Council also began what it called “the first of a series of discussions” on the FASB’s post-implementation review of the Credit Losses Standard, focusing on the initial costs and benefits of the standard as it related to trade receivables. It found that “Overall, FASAC members stated that the adoption of the standard had an insignificant overall financial impact on the allowance for credit losses related to trade receivables.”

For a recap of the FASAC meeting highlights, visit: [FASB]


The SEC voted to propose a limited, conditional exemption allowing finders, specifically those who raise capital in the private markets from accredited investors, to be compensated without registering as brokers with the SEC.

If adopted, “the proposed exemption would permit natural persons to engage in certain limited activities involving accredited investors without registering with the SEC as brokers,” according to an October 7, 2020 press release. “The proposed exemption seeks to assist small businesses to raise capital and to provide regulatory clarity to investors, issuers, and the finders who assist them.”

The SEC’s proposal would create two classes of finders: Tier I Finders and Tier II Finders. Each tier would be subject to conditions tailored to the scope of their respective activities. The proposed exemption would establish clear lanes for both registered broker activity and limited activity by finders that would be exempt from registration.

A Tier I Finder would be limited to providing contact information of potential investors in connection with only a single capital raising transaction by a single issuer in a 12 month period. A Tier I Finder could not have any contact with a potential investor about the issuer.

A Tier II Finder could solicit investors on behalf of an issuer, but the solicitation-related activities would be limited to: (i) identifying, screening, and contacting potential investors; (ii) distributing issuer offering materials to investors; (iii) discussing issuer information included in any offering materials, provided that the Tier II Finder does not provide advice as to the valuation or advisability of the investment; and (iv) arranging or participating in meetings with the issuer and investor.

“Many small businesses face difficulties raising the capital that they need to grow and thrive, particularly when they are located in places that lack established, robust capital raising networks,” said SEC Chairman Jay Clayton. “Particularly in these ecosystems, finders may play an important role in facilitating capital formation for smaller issuers. There has been significant uncertainty for years, however, about finders’ regulatory status, leading to many calls for Commission action, including from small business advocates, SEC advisory committees and the Department of the Treasury. If adopted, the proposed relief will bring clarity to finders’ regulatory status in a tailored manner that addresses the capital formation needs of certain smaller issuers while preserving investor protections.”

This proposed effort to expand capital raising opportunities for smaller companies follows on the heels of September’s ruling by the SEC that expanded the definition of an “accredited investor”. As reported in Simply Stated, the new rule created new qualification categories that would allow more investors to participate.

There will be a 30-day comment period for the proposed Finder’s exemption following publication in the Federal Register.

For more detailed information, visit: [https://www.sec.gov/news/press-release/2020-248]


The SEC has adopted a new rule and amendments designed to streamline and enhance the regulatory framework for funds that invest in other funds.

In an October 7, 2020 press release, the SEC said the action is “designed to put in place a comprehensive regulatory framework for fund of funds arrangements. The rule also reflects the Commission’s decades of experience with fund of funds arrangements and will create a consistent and efficient rules-based regime for the formation and oversight of funds of funds.”

According to Chairman Jay Clayton, “The framework adopted today will provide flexibility to fund managers to allocate and structure investments efficiently, without the costs and delays of seeking individualized exemptive orders, as long as the arrangements satisfy a number of conditions designed to enhance investor protection.”

He continued, “Main Street investors have increasingly used mutual funds, exchange-traded funds (ETFs) and other types of funds to access our markets and invest for their future. To achieve asset allocation, diversification and other objectives, many funds have also invested in other funds. Today’s action will enhance and modernize the regulatory framework for these arrangements.”

The SEC reported that “approximately 40% of all registered funds hold an investment in at least one other fund. Total net assets in mutual funds that invest primarily in other mutual funds have grown to $2.54 trillion in 2019.  Retail investors similarly use fund of funds arrangements as a convenient way to allocate and diversify their portfolio through a single, professionally managed investment.  Rule 12d1-4 will allow a fund to acquire the shares of another fund in excess of the limits of the Investment Company Act without obtaining an individual exemptive order from the Commission if the funds comply with conditions designed to enhance investor protection.”

For details of the SEC ruling, visit: [https://www.sec.gov/news/press-release/2020-247]




Corporate finance chiefs are looking to at least 2021 for a return to pre-COVID levels of employment and revenues, while at the same time showing optimism for the future of the U.S. economy, and their own companies, according to the CFO Survey, conducted quarterly by Duke University’s Fuqua School of Business and the Federal Reserve Bank of Richmond.

The survey, which includes responses from chief financial officers of 269 U.S. businesses across industries and business sizes, was conducted September 14-25, 2020 and focused on optimism for both their companies and the U.S., their most pressing concerns, and expectations for their firm’s performance and employment.

When asked to rate their optimism for the financial prospects of their companies, the average optimism was 70.4 percent. When asked about their optimism for the U.S. economy, the average was 61 percent. Both numbers didn’t change much from the Q2 survey conducted June 2020, when CFOs ranked optimism for their own firms at 69.8 percent and optimism about the U.S. economy at 59.8 percent.

Both numbers are well above the optimism ratings reported in Q1, when the pandemic hit. In that March survey, optimism for their own firms was 59.7 percent, while optimism for the U.S. economy was rated at 50.9 percent.

It is interesting to note that, even in the midst of  the COVID-19 pandemic, optimism is more favorable now compared with the March 2009 survey taken in the middle of an historic financial fallout. In that 2009 survey, CFO optimism tanked to the lowest in the survey’s history, recording a 53.4 percent optimism in their own companies and only 39.9 percent optimism in the U.S. economy.

Though it has improved over the last two quarters, CFOs still are reporting below pandemic levels of revenue and employment and they don’t expect that to change until 2021, when they anticipate that wages and non-wage compensation will pick up.

When asked about their most pressing concerns, CFOs said top of mind were their firm’s own demand/sales/revenue, the availability and quality of labor, the broad health of the economy, and the political climate.

Not surprisingly, CFOs said their firms continue to limit spending. More than half of respondent firms reported either “somewhat” or “significantly” decreased spending in the third quarter of this year.

For a deep dive into the CFO Survey, visit: [SURVEY]

Money Talks



In a never ending pursuit of the bad actors, the SEC reported that in 2020, it shelled out $175 million to whistleblowers in 39 individual awards; more than in any prior fiscal year.

In September alone, the SEC paid almost $5 million to four individuals, who “provided critical information that alerted the Commission of the alleged wrongdoing and resulted in successful enforcement action,” according to the SEC’s September 30th statement.

Overall, the SEC reports that it has awarded almost $562 million to 106 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.

Awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.


Election year politics

“Those that travel the high road of humility in Washington D.C. are not bothered by heavy traffic.”

Former U.S. Senator – Alan Simpson

“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”

Comedian – Groucho Marx

“It’s not the people who vote that counts, it’s the people who count the votes.”

Former Premier of the Soviet Union – Joseph Stalin


An Audited Legacy of Quality

Weinberg & Company is consistently at the very top when it comes to the quality of our work– just check our legacy of stellar PCAOB inspection reports.

 We thought we were building a leading, international accounting firm by providing Big 4 expertise with personal service at reasonable fees.

Turns out we were also building “An Audited Legacy of Quality.”

“We believe your capital is best deployed for your company’s growth, not for runaway accounting fees.”

Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.