PCC FINALIZES TWO PRIVATE COMPANY STANDARDS; SENDS TO FASB FOR
ENDORSEMENTNorwalk, CT—October 1, 2013—The Private
Company Council (PCC) today voted to finalize two alternatives within U.S.
Generally Accepted Accounting Principles (GAAP) for accounting for interest rate
swaps and, separately, accounting for goodwill in a business combination for
The Financial Accounting Standards Board (FASB) will
discuss the proposed alternatives and also consider the applicability of these
alternatives to publicly traded companies and not-for-profit organizations in
the coming weeks. If the FASB decides to endorse the alternatives, they will be
issued as final Accounting Standards Updates.
The first proposed GAAP
alternative—Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate
Swaps—would give private companies, other than 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
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 ten years, or less under certain
circumstances, and to apply a simplified impairment model to goodwill. Goodwill
is the residual asset recognized in a business combination after recognizing all
other identifiable assets acquired and liabilities assumed.
"The PCC and
the FASB received significant stakeholder input on the proposals on accounting
for interest rate swaps for private companies and for goodwill in a business
combination," said PCC Chairman Billy M. Atkinson. "Based on this input, the PCC
was able to finalize two proposals addressing issues users, preparers, and
public accountants of private company financial statements have told us are a
priority. We look forward to receiving the FASB´s endorsement on the
alternatives in the coming weeks so that 2013 implementation is possible."
The proposed GAAP alternative on interest rate swaps represented a change
from the original proposal. The original proposal enabled private companies to
use both a simplified hedge accounting approach and a combined instruments
approach to account for certain types of interest rate swaps. The PCC decided to
separate the combined instruments approach from the revised proposal and
directed the FASB staff to conduct more research on the combined instruments
approach for further discussion at a future meeting.
Also discussed at
the 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. The PCC and
the FASB also discussed and provided input on the FASB´s projects on Leases,
Stage Entities, and the Definition
of a Nonpublic Entity.
During the meeting, which was webcast at http://www.fasb.org/, the PCC reminded
stakeholders to provide comments on the proposed GAAP alternative, PCC Issue
No. 13-02, Applying
Variable Interest Entity Guidance to Common Control Leasing Arrangements
(formerly FIN 46(R) and FAS 167) by October 14. The PCC and the FASB also
announced that the final Private
Company Decision-Making Framework is expected to be issued by November.
The next PCC meeting will be held on Tuesday, November 12, 2013. For more
information, visit the PCC
About the Private Company Council (PCC)
The PCC determines alternatives to existing nongovernmental
U.S. GAAP to address the needs of users of private company financial statements,
based on criteria mutually agreed upon by the PCC and the FASB. Before being
incorporated into U.S. GAAP, PCC recommendations will be subject to a FASB
endorsement process. The PCC also serves as the primary advisory body to the
FASB on the appropriate treatment for private companies for items under active
consideration on the FASB´s technical agenda.
About the Financial
Accounting Standards Board
Since 1973, the Financial Accounting
Standards Board has been the designated organization in the private sector for
establishing standards of financial accounting and reporting. Those standards
govern the preparation of financial reports and are officially recognized as
authoritative by the Securities and Exchange Commission and the American
Institute of Certified Public Accountants. Such standards are essential to the
efficient functioning of the economy because investors, creditors, auditors, and
others rely on credible, transparent, and comparable financial information. For
more information about the FASB, visit our website at http://www.fasb.org/.