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FASB endorses private-company alternatives

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Nov 27, 2013

At its meeting on Monday, the FASB voted to endorse for final issuance two alternatives to U.S. GAAP for private companies put forth by the Private Company Council (PCC).

The Board endorsed the following decisions that the PCC made at its meeting on September 30 and October 1, 2013:

  • PCC Issue No. 13-01B, "Accounting for Goodwill": This alternative will allow private companies to elect to amortize goodwill recognized from a business combination over 10 years (or, alternatively, a period less than 10 years if more appropriate). It will also simplify the goodwill impairment process by allowing private companies to test goodwill (1) only when impairment indicators are present (rather than at least annually) and (2) at an entity-wide level (rather than at the reporting-unit level).
  • PCC Issue No. 13-03A, “Accounting for Receive-Variable, Pay-Fixed Interest Rate Swaps — Simplified Hedge Accounting Approach”: This alternative will allow private companies that are not financial institutions to apply, in certain circumstances, a simplified hedge accounting method to hedging relationships involving variable-rate debt and a pay-fixed, receive-floating interest rate swap. The simplified approach assumes no hedge ineffectiveness in the hedging relationship, thereby resulting in an income statement impact similar to what would have occurred had the private company simply entered into a fixed-rate borrowing. In addition, the simplified approach allows private companies to measure the hedging interest rate swap at its settlement value, rather than at fair value, and gives private companies more time to put hedge documentation in place. The alternative also provides certain private companies with relief from fair value measurement disclosure requirements.

Public Business Entities and Not-for-Profit Entities

The Board added a project to its agenda to consider changes to the accounting for goodwill for public companies and not-for-profit entities (NFPs). The Board did not add a project to its agenda on the simplified hedge accounting approach for public business entities and NFPs because it plans to consider the matter as part of its hedging project.

For more information, see Deloitte's Accounting Journal Entry or the meeting minutes on the FASB's Web site.

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