The Private Company Council (PCC) of the FASB voted to finalize two alternatives within U.S. GAAP: (1) accounting for interest rate swaps; and (2) accounting for goodwill in a business combination for private companies. The FASB will discuss the proposed alternatives and also whether they should apply to publicly traded companies and not-for-profit organizations.
The first proposed GAAP alternative, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps, would give private companies (except financial institutions) the option to use a simplified hedge accounting approach to account for certain types of interest rate swaps that are entered into for the purpose of economically converting variable rate interest payments to fixed-rate payments. The alternative would also extend the exemption from certain fair value disclosures to private companies for which such swaps are their only derivatives.
The second proposed GAAP alternative, Accounting for Goodwill Subsequent to a Business Combination, would permit a private company to subsequently amortize goodwill over a period of 10 years, or less under certain circumstances, and to apply a simplified impairment model to goodwill.
Also discussed at a recent PCC meeting was the FASB exposure draft on PCC Issue No. 13-01A, Accounting for Identifiable Intangible Assets in a Business Combination, which modifies the requirement for private companies to separately recognize fewer intangible assets acquired in a business combination. The PCC directed the FASB staff to conduct more research for further discussion at a future meeting.
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