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FASB issues guidance on goodwill and interest rate swaps for private companies

  • FASB (US Financial Accounting Standards Board) Image

Jan 16, 2014

The FASB has issued Accounting Standards Updates (ASU) No. 2014-02, “Accounting for Goodwill,” and ASU 2014-03, “Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach,” which provide alternative guidance for private companies.

ASU 2014-02

This ASU allows private companies an alternative to amortize goodwill on a straight-line basis over a ten-year period, or less if the company demonstrates that another useful life is more appropriate. In addition, private companies are allowed to use a simplified impairment model to goodwill. The guidance will help reduce the cost and complexity when preparing private company financial statements that carry goodwill on its balance sheets.

ASU 2014-03

This ASU provides private companies the option to apply the simplified hedge accounting approach for interest rate swaps that are entered into for the purpose of economically converting variable-rate interest payments to fixed-rate payments. The guidance will help reduce the cost and complexity associated with interest rate swaps and will reduce volatility in private companies’ income statements. This alternative guidance is not permitted for public companies or not-for-profit organizations.

Both ASUs are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. Early application is permitted.

More information is available on the FASB's Web site:

  • Press release
  • FASB in Focus newsletter
  • Video discussion by FASB member Daryl Buck and PCC member Tom Groskopf
  • ASU 2014-02, Intangibles — Goodwill and Other (Topic 350): Accounting for Goodwill (a consensus of the Private Company Council)
  • ASU 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps — Simplified Hedge Accounting Approach (a consensus of the Private Company Council)

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