Private company reporting
Accounting and reporting for private companies continues to evolve -- both through the efforts of the Private Company Council (PCC) and new guidance from the FASB.
Key developments for private company reporting
- The FASB issued ASU No. 2014-02, Accounting for Goodwill on January 16, 2014. This standard provides private companies with an accounting alternative which is intended to simplify the accounting and reporting for goodwill. Under this alternative, a nonpublic entity is able to amortize goodwill on a straight-line basis over a period of ten years (or over a shorter period if the company demonstrates that another useful life is more appropriate). Goodwill would be subject to impairment testing only upon the occurrence of a triggering event. The impairment test can be performed at an entity-wide or reporting unit level, based upon the Company’s accounting policy election. If a quantitative impairment test is required, a one-step impairment test would be performed. The amount of the impairment would be measured by calculating the difference between the carrying amount of the entity (or reporting unit, as applicable) and its fair value. A hypothetical purchase price allocation to isolate the change in goodwill (i.e., step two) would no longer be required.
- Concurrently, the FASB issued ASU No. 2014-03, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach. This standard provides private companies that are not financial institutions with an accounting alternative which is intended to make it easier for certain interest rate swaps to qualify for hedge accounting. Under this alternative, receive-variable, pay-fixed interest rate swaps that meet specific criteria would qualify for a simplified hedge accounting model, which would make it easier to qualify for and to apply hedge accounting and also extend the time companies have to complete the necessary documentation. Furthermore, it provides a simplified measurement model based on the settlement value of the swap rather than its fair value.
- On March 20, 2014, the FASB issued ASU No. 2014-07, Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements. Under this standard, private companies can elect an exemption from the variable interest entity (VIE) consolidation model applicable to certain common control leasing arrangement when a specific set of criteria are met. A private company electing to adopt the alternative would no longer be required to consolidate certain entities it had previously consolidated under the VIE model. However, the private company would still need to consider whether it should consolidate the legal entity under a voting interest model. There are additional disclosure requirements for companies electing to apply the alternative.
- These standards are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early adoption is permitted, which means that an eligible nonpublic entity could elect to apply one or more of the alternatives in financial statements that were not made available for issuance prior to the release of the final standard.
- The final standards provide relief to nonpublic entities by offering simplified accounting models. For example:
– Under the new goodwill alternative, the previously required annual impairment assessment is now a trigger-based impairment assessment. In addition, companies have an opportunity to make an accounting policy election to perform the impairment test at an entity-wide level as opposed to the previously required reporting unit level. Finally, any goodwill impairment loss is measured in a one-step test, so the hypothetical purchase price allocation (i.e., step 2) is no longer required.
– The new simplified hedge accounting alternative provides relief from existing hedge accounting guidance by making it easier for a company to qualify its receive-variable, pay-fixed interest rate swaps for hedge accounting, as long as certain conditions are met, and also provides a simplified measurement model.
– The new alternative for common control leasing arrangements simplifies the consolidation model for private companies by providing them with an exemption from applying VIE guidance for certain common control leasing arrangements.
What's next at the Private Company Council (PCC)
- The next PCC meeting is on February 13, 2015.
WebcastPrivate Company Services webcast series: Accounting challenges - acquisitions, dispositions, refinancings and more - June 3, 2015
This PwC National Professional Services Group webcast will discuss key considerations related to private company accounting for acquisitions, dispositions and debt transactions, focusing on the areas of accounting that are often challenging to pin down.
PwC comment letter (FASB)PwC comments on FAF's Three-Year-Review of the Private Company Council
5/6/15 | Assurance services
We believe the PCC has established itself as an important contributor to the FASB's understanding of private companies.
VideoPrivate company accounting alternatives
3/5/15 | Assurance services
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VideoPrivate company alternatives impact on public companies
3/5/15 | Assurance services
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In depthIn depth: FASB provides private companies relief on intangibles
2/3/15 | Assurance services
FASB provides option for companies that are not PBEs to recognize fewer intangibles acquired in a business combination.
Practical tipSEC filings considerations when a private company applies PCC standards
12/11/14 | Assurance services
This Practical tip explains presenting financial information of a private company applying PCC standards in SEC filings.
Private company reporterPrivate company reporter December 2014
2014 wrap-up: What to know for your financial statement close
12/5/14 | Assurance services
We provide a “one-stop shop” for the standard setting that could affect your 2014 private company financial statements.
In depthIn depth: Pushdown accounting now optional
12/5/14 | Assurance services
New guidance issued by the FASB makes pushdown accounting optional for public and nonpublic companies effective now.
VideoTop 5 financial reporting reminders 2014
11/24/14 | Assurance services
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WebcastPrivate Company Services: 2014 Year-end accounting & reporting developments webcast - On demand (CPE-eligible)
This PwC National Professional Services Group webcast discusses current accounting and financial reporting developments with a focus on private company considerations. Watch a replay or participate in the on demand (CPE-eligible) version of this webcast.
Accounting guidesFinancial statement presentation - 2014 accounting and financial reporting guide
10/30/14 | Assurance services
The inaugural edition of our "Financial statement presentation" accounting and financial reporting guide addresses U.S. GAAP presentation and disclosure requirements of common balance sheet and income statement accounts.
WebcastTop year-end planning considerations for private companies, family businesses and individuals webcast
Private Company Services
Private Company Services' annual Year-end Tax and Wealth Management Planning webcast will focus on the key tax considerations for both businesses and individuals and strategies to consider to maximize your tax planning as we approach year-end.
Private company reporterPrivate company reporter September 2014
PCC votes to simplify the accounting for certain intangible assets
9/22/14 | Assurance services
Under the alternative, private companies will not have to separately recognize and measure certain intangible assets.
Private company reporterPrivate company reporter - PCC makes progress on intangible assets
7/22/14 | Assurance services
The Private Company Council (PCC) continues to make progress on simplifying accounting for intangible assets acquired in a business combination.
In depthIn depth: Private company variable interest entity relief
7/17/14 | Assurance services
FASB provides option to exempt certain common control leasing arrangements from the VIE model
Corporate Governance SeriesWhat is a board's role in family business?
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In the loopIn the loop: How new accounting elections could affect your deal or IPO strategy
5/20/14 | Assurance services
In the loop is an executive-level series addressing important financial reporting and regulatory issues. Our first edition discusses how changes in private company accounting could affect future deal or financing strategies.
Private company reporterPrivate company reporter - PCC continues discussions on intangible assets
5/1/14 | Assurance services
The PCC continued redeliberation of an alternative for intangible assets in a business combination but made no decision.
DatalineDataline: Simplified hedge accounting approach - New private company alternative for certain interest rate swaps
4/3/14 | Assurance services
The FASB issued a new accounting standard for private companies that is intended to simplify the hedge accounting requirements for certain interest rate swaps.
VideoNew goodwill standard for private companies
3/17/14 | Assurance services
PwC's Kirsten Schofield, John Stieg, and Jim Gazley discuss the PCC's newly issued goodwill standard and navigating the choice to adopt or not.
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3/10/14 | Assurance services
The FASB and PCC have issued a new accounting standard for private companies that is intended to simplify the goodwill accounting model.
Private company reporterPrivate company reporter - PCC amends, re-approves final VIE alternative for common control leasing arrangements
1/31/14 | Assurance services
In January, the PCC revised, then re-approved an alternative offering private companies an exemption from applying the VIE consolidation model to certain arrangements
Private company reporterPrivate company reporter - PCC approves alternative that exempts certain arrangements from VIE guidance
11/15/13 | Assurance services
The PCC approved a final standard that offers private companies an exemption from applying the VIE consolidation model to certain common control leasing arrangements.
Private company reporterPrivate company reporter - September 30 and October 1, 2013
10/7/13 | Assurance services
At its most recent meeting, the PCC approved final standards for the accounting for goodwill and for a simplified hedge accounting model for certain interest rate swaps.
- Private company reporter - August 15, 2013
8/15/13 | Assurance services
On August 7, the FASB issued an exposure draft on the definition of a public business entity and endorsed the PCC proposal for VIE considerations of common control leases.
- Private company reporter - July 16, 2013
7/25/13 | Assurance services
On July 16, the PCC proposed to the FASB an accounting alternative that would exempt nonpublic entities from applying certain variable interest entity guidance. This edition of Private company reporter provides further information on the proposed alternative, as well as highlights of other recent developments related to private company reporting.
PwC comment letter (FASB)PwC comments on FASB and PCC Invitation to Comment: Proposed Private Company Decision-Making Framework
6/20/13 | Assurance services
PwC generally believes the guide identifies the appropriate matters to consider when determining whether a modification to GAAP should be available to private companies.
- Private company reporter - June 13, 2013
6/13/13 | Assurance services
On June 10, the FASB endorsed each of the accounting alternatives previously approved by the PCC, related to intangible assets, goodwill and interest rate swaps. This edition of Private company reporter provides further information on the proposed alternatives, as well as highlights of other recent developments related to private company reporting.
- Private company reporter (May 7, 2013 meeting)
5/16/13 | Assurance services
At its May meeting, the PCC approved alternatives in the areas of business combinations and interest rate swaps which are now subject to endorsement by the FASB.
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