FASB Gives Thumbs Up to Private Co. GAAP Exceptions
Last month, the FASB endorsed 2 separate GAAP exceptions regarding private companies. This will mark a milestone in this field as it will implement rules with are not only simpler but less costly too for those private companies who produce financial statements which are realistic economically. This FASB endorsement of the exceptions which were crafted by the PCC, Private Company Council, means that private company exceptions will now be written into GAAP. The final standards are slated to be issued before the end of 2013.
these exceptions will;
Mean that private companies are exempt from having to participate in impairment tests regarding goodwill following a business combination.
Provide a much simplified hedge account approach to accounting for selected interest rate swaps which private companies, rather than financial institutions, can enter in order to convert their variable rate debts to fixed rate. Private companies who only have these swaps as their derivatives will be exempt from several disclosures of fair value.
The FASB has also brought a project to the table which will determine whether changes made to goodwill impairment accounting should also be made for none profit making organizations and public companies. The board has acknowledged this might create extra changes that private companies will feel at a later date. This is what board members are calling a double switch.
The board did, however, choose to offer immediate relief to private companies rather than deny the relief. They said this was to try to ensure consistency in the future. Russell Golden, the Chairman of FASB, said that it would, ideally, have been both more efficient and effective if this could have been dealt with holistically. He added that he thought there was an element of risk with the so called double switch, but that he also thought it could be mitigated if private-company constituents were educated and worked expeditiously on both not-for-profits and private companies.
As well as the 2 exceptions which were approved, the PCC has sent an exception to the FASB for endorsement. This is applicable to VIE's, Variable-interest Entities and offers guidance to private companies regarding arrangements for common-control leasing.
Start free ReadyRatios
reporting tool now!
Last Accounting News
- IFRS Foundation Publishes IFRS Taxonomy 2018
- IASB Urged to Improve Standards-setting Processes
- FSB Encourages Insurers to Act on the New Insurance Standard
- IFRS Foundation Trustees and the IASB Meets with the Japanese Stakeholders in the Wake of More Japanese companies Adopting IFRS Standards
- IASB Replaces IFRS 4 with the Issuance of a New Standard on Insurance Accounting
- IASB has Proposed Minor Amendments to IFRS 9 Relating to the Measurement of Financial assets with Prepayment Feature
- AAT Has Been Approved as an Apprentice Assessment Organization