PCC Finalizes Two GAAP Standards for FASB to Endorse

By Jason Bramwell
Two alternatives within US Generally Accepted Accounting Principles (GAAP)  accounting for interest rate swaps and accounting for goodwill in a business combination for private companies  were finalized by the Private Company Council (PCC) during a meeting on October 1.
The Financial Accounting Standards Board (FASB), which works with the PCC to determine whether and when to modify US GAAP for private companies, 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 US 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 derivatives, according to the FASB.
The finalized proposal for the alternative on interest rate swaps is different from the original proposal the PCC issued in May. 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 FASB staff to conduct more research on the combined instruments approach for further discussion at a future meeting.
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 defined by the FASB as the residual asset recognized in a business combination after recognizing all other identifiable assets acquired and liabilities assumed.
The original proposals of both alternatives as well as an accounting proposal on intangible assets acquired in business combinations were endorsed by the FASB on June 10. The public comment period on the three PCC accounting proposals' exposure drafts ended on August 23.
PCC Chairman Billy Atkinson said in a written statement that the PCC and the FASB received significant stakeholder input on the alternatives for interest rate swaps and goodwill.
"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," he said. "We look forward to receiving the FASB's endorsement on the alternatives in the coming weeks so that 2013 implementation is possible."
The third accounting proposal, PCC Issue No. 13-01A  Accounting for Identifiable Intangible Assets in a Business Combination  was also discussed at the PCC meeting on Tuesday. The proposal modifies the requirement for private companies to separately recognize fewer intangible assets acquired in a business combination. The PCC directed FASB staff to conduct more research for further discussion at a future meeting. 
Also at Tuesday's meeting, the PCC and the FASB announced that the final Private Company Decision-Making Framework is expected to be issued by November.
The next PCC meeting will be held on November 12.
Related articles:

You may like these other stories...

Inversions: Loophole Is the ProblemJacob J. Lew, the U.S. Treasury Secretary, published an opinion piece in the Wall Street Journal that "the system has become full of inefficiencies and special-interest loopholes. That...
School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
The Financial Accounting Standards Board (FASB) has relaunched its technical agenda web page, which Chairman Russell Golden said will inform visitors at a glance on where any given FASB project stands, the steps it took to...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.