At its June 10 meeting, the FASB unanimously endorsed each of the accounting alternatives previously approved by the Private Company Council (PCC). The proposed alternatives would permit a private company to apply simplified accounting treatments that would reduce cost and complexity in accounting and reporting. The endorsed alternatives are as follows:
Intangible assets in a business combination
- The recognition and measurement of intangible assets would be subject to new criteria that would potentially reduce the number of intangible assets recognized from that under the current standard.
Subsequent accounting for goodwill
- Goodwill would no longer be subject to a two-step impairment test. Instead, it would be amortized and subject to a trigger-based simplified impairment test performed at an entity-wide level.
Interest rate swaps
- Interest rate swaps that meet specific criteria would be allowed to follow a “combined instruments” model that eliminates the need for derivative accounting currently required under GAAP.
- If other, less-restrictive criteria are met, a “simplified shortcut method” could be used, which would make it easier to apply hedge accounting and avoid income statement volatility.
The FASB is expected to issue exposure drafts for each proposed alternative by the end of June.
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.